- The AB5 law was approved in California, forcing Uber to consider drivers as employees
- The ride-sharing company argues that the app’s management is at the core of the business, so the drivers should be considered independent
Another chapter of Uber’s battle with their drivers came to an end, but not a happy ending this time. Unlike Brazil’s STJ decision, which has benefited the ride-sharing company by not considering Uber drivers as employees, the state of California in the US passed a different judgment. The AB5 law was approved with the goal of forcing big-techs to treat outsourced workers as employees.
This means that the company must provide all the rights of a regular employee to each driver, increasing significantly Uber’s operating expenses. Since then, the ride-sharing giant has yet to reach the Q2 results that the market expected, achieving a revenue of $ 2.87 billion, well below the $ 3.05 billion of earlier forecasts. It is not difficult to imagine how big the impact of increasing costs so heavily could be, and why the law makes Uber so nervous.
As an answer to the decision, the company will appeal judicially. According to The New York Times, Uber’s argument is based on one of the three main pillars of the law, which states that for classifying someone as a freelancer or outsourced, the worker must only perform tasks unrelated to the normal course of the business. The company will fight in court to prove that it is a technological company, having the app management as the core of the business and turning hired drivers as a secondary aspect of its business model; that is, Uber drivers should be considered as independent.
While Uber’s Chief Legal Officer, Tony West, supported the argument in an interview for The New York Times, knowing that a great battle waits for them in court, the CLO argued that “just because the test is hard, doesn’t mean that we will not be able to pass it,” although experts on the matter aren’t so optimistic about it. “Courts have not necessarily been receptive to that argument,” declared the expert consulted by The New York Times, Richard Meneghello, co-chairman of the gig-economy practice group at the law firm Fisher Phillips.
The decision will not only affect Uber but also its main competitor, Lyft, and both of them are committed to continuing the fight to the very last, so as to win the right to sustain the current business model with independent drivers However, the matter is generating divided opinion, and California’s decision can have an influence on similar cases in other countries.
In Latin America, Brazil was the first country to pick Uber’s side, but it wasn’t a final decision, for different judgments could be made in similar cases until the country defines a legal protocol about it.
Uber is not inexperienced in finding a way to deal with adverse judicial decisions. Will they be able to win again? Make your bet.