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SOUTHERN CALIFORNIA RECORD

Friday, March 29, 2024

If Prop 22 fails, 'it's game over' for Uber and Lyft, observer says

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A three-judge appellate panel upheld a lower court injunction last week that requires Uber and Lyft to convert their drivers from independent contractor to employees.

“Although the business context may be relatively new, we conclude that the injunction was properly issued in accordance with enduring principles of equity,” wrote California’s First Appellate District Judges Jon B. Streeter, Stuart R. Pollak and Tracie L. Brown in their 74-page opinion. “It is broad in scope, no doubt, but so too is the scale of the alleged violations. The August 10th, 2020 order is affirmed. The stay issued on August 20th, 2020 shall expire 30 days after the issuance of the remittitur in this appeal.”

But by the time the stay expires in 30 days, the Nov. 3 elections will have come and gone and a decision will have been rendered by voters on Proposition 22, the online ride-hailing companies' last hope to reverse Assembly Bill (AB) 5.

“If the voters support Prop 22, that's the end of the discussion about independent contractors in the gig economy and these ride-sharing questions,” attorney Brian Kabateck told the Southern California Record. “The reason that California has this initiative referendum system is to put a balance on the power of the California legislature. The legislature can do whatever it wants but the people can enact an initiative to overrule what they've done. So, if the voters vote yes on Prop 22, that’s exactly the kind of check on power that the founders of California put into place.” 

As previously reported in the Southern California Record, AB 5 required drivers and other gig-economy workers be treated as employees and not independent contractors while Prop 22, a ballot initiative, would override AB 5 and institute its own benefits, such as accident insurance, disability payments and death insurance.

“It's going to have a huge impact, if in eight days Prop 22 goes down in defeat, and if it does, then it’s probably game over for Uber and Lyft,” Kabateck said in an interview. “Uber and Lyft could appeal the decision to the Supreme Court of California but I doubt the court will accept the petition.”

In response to AB 5, the gig economy companies changed some business practices by processing rider’s payments in drivers' bank accounts separate from corporate accounts, by allowing drivers the option of setting a fair multiplier and by allowing them to purchase Drive Passes rather than withholding a service fee on a per ride basis.

But the appellate judges were unswayed.

“We acknowledge these new adopted business practices but are not persuaded they make a difference to the analysis,” the ruling states. “Fair multipliers are within limit set by Uber and the Drive Passes provide only a limited number of leads, including leads the driver rejects, and Uber has not shown that Drive Passes account for a significant portion of its business or that drivers use them excessively. Even if some drivers take advantage of these options, we agree with the trial court that these changes do not alter the basic fact that providing transportation is part of Uber's usual course of business.”

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