The law, 5 AB, which entered into force on January 1, is the toughest of its kind in the US and creates difficulties for companies seeking to classify workers as self-employed contractors instead of as employees entitled to minimum wages and social benefits. This is due to a drop in the number of trips and the difficulty of drivers to protect themselves from contracting the virus.
California is the largest U.S. market for Uber and Lift, and is also the state where the two companies were formed.
These legal moves are the most significant challenges faced by the business model of travel sharing companies since their inception. This was reported by the British “Guardian”. San Francisco Supreme Court Justice Ethan Shulman adjourned the order for ten days to allow companies to appeal.
According to a spokesman for Uber, who delivered the remarks to the Guardian, the company intends to appeal immediately. This means that the restraining order will not for the time being affect the activities of the companies. However, the spokesman noted that despite the rejection, such a ruling in a California-sized market would undoubtedly affect the industry.
“It’s huge,” said Vienna Duvall, a law professor at the University of California, who studies the economy of the gig. “In the last eight years, this is the closest the legal system has come to enforcing workers’ rights in the gig economy,” she noted in a conversation with the Guardian.
Since Law 5 AB came into force, Uber has made changes to its app, such as allowing drivers to set rates themselves. The aim was to show that drivers operate in the status of contractor workers and thus avoid the need to comply with the law. At the same time, Uber, Lift and the catering company Dor-Dash have invested more than $ 100 million in appealing the law, through public support for a referendum on the issue to be held on November 3, in parallel with the presidential election. These efforts were cited in a lawsuit filed by the State of California against the companies, in which it criticized them for “an aggressive public relations campaign designed to determine their ability to exploit their employees in the midst of the plague of the century.”
Drivers have also called on companies to stop investing huge sums in trying to evade law enforcement, and instead invest that money in supporting workers, according to Adan Alwa, a lift driver and member of the Gig Workers Rising workers’ rights organization. “For years, workers have organized and spoken out against our exploitation by gigantic economy companies worth billions of dollars and refused to comply with the law,” he said. “Today, the court has sided with the workers and not the corporations.”
The legal drama takes place at a time when the activity of travel sharing companies is plummeting. In a conversation with analysts last week, with the publication of second-quarter reports, Uber CEO Dara Kosrashahi noted that the state of the industry varies greatly from region to region. Markets such as Hong Kong and New Zealand, in which the corona is controlled or stimulated, have recorded a recovery to pre-crisis levels. At the same time, in the US, the industry continues to record low levels of activity. According to Uber, orders fell by 73% in the second quarter and revenues fell by 29% compared to the same period last year, to $ 3.17 billion. On his base salary until the end of the year, this coincides with the company’s announcement of the dismissal of 14% of employees.
Lift will report on the effects of the plague, with the release of second-quarter results. In April, the volume of travel in the company fell by 75% compared to the corresponding month in 2019.
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