California Forces Lyft & Uber Drivers to be W-2 Employees

By Krishna Chandrasekaran

In the recent court case, People of the State of California vs. Uber Technologies, Inc. A Delaware Corpooration et. al, Judge Ethan Schulman of the San Francisco Superior Court Drivers ordered Lyft and Uber to stop classifying drivers as independent contractors, rather than employees of the companies.

First of all, a court has no constitutional or legal authority to order companies to force them to hire contractors – further evidence that California is not the land where liberty or the rule of law are respected or protected to any appreciable degree. Under this new illegitimate and ridiculous court ruling, drivers of Lyft and Uber can no longer operate as independent contractors, as doing so violates California’s draconian labor laws.

While drivers will get more “benefits”, like minimum wage, health insurance, unemployment insurance, overtime pay, etc., like everything, it comes at a steep cost, and is therefore anything but free. While the courts ruled that Lyft and Uber can still let drivers have flexible hours, there are now a bunch of more costly extra benefits that Lyft and Uber must now pay the drivers. This will inevitably push costs up, which will ultimately be passed down to riders and drivers. First of all, some current drivers will be laid off, and fewer new ones will get hired. Furthermore, riders will likely have to pay higher fares for rides, as Lyft and Uber, like every other company, will pass on these legally mandated business costs to end-customers, the riders. If ride fares increase, fewer people will ride, further hurting Lyft and Uber financially at a time when both companies, like far too many today, are struggling mightily to make a profit or generate positive cash flow.

A further adverse implication of this ruling is that under California labor laws, Uber and Lyft will MOST LIKELY be required to buy and provide cars to its drivers, who now must be employees. But if Uber can no longer avoid the gargantuan capital investment of cars, something that enabled it to disrupt the ride service industry to the all-around benefit of the economy, then they won’t be able to compete with typical taxi companies, further pushing Lyft and Uber closer to closing permanently, something that nobody wants. This will further exacerbate the poverty that California politicians have already imposed on residents by irrationally, tyrannically and unconstitutionally shutting down commerce (aside from “essential services”), causing many to lose their jobs and turn to driving Lyft/Uber to try to survive financially. The ability to drive as independent contractors makes Lyft/Uber more viable as a back-up, as it is far easier to start driving and earning money faster that way, as an independent contractor, rather than having to drive and be hired as typical W-2 Employees.

See: 177 Different Ways to Generate Extra Income

The biggest reason everyone, especially everybody who lives in California, should be extremely concerned is that this ruling could push Uber and Lyft out of California. Already, Uber CEO Dara Khosrowshahi is considering suspending Uber until the November election, at which point voters will have a chance to pass Proposition 22, which would exempt drivers from the restrictions of AB 5.

So what is the solution to this? Like with all these economic issues, let liberty prevail, and abolish AB 5. AB 5 is a coercive law that forces, and thereby coerces, Lyft and Uber to only hire employees and forcibly restricts them from contracting with willing drivers. AB 5 therefore violates liberty, and should therefore have never became law. Let drivers negotiate with Lyft and Uber. If they want benefits for lower pay per ride, then they should be free to negotiate such arrangements and vice-versa. Independent contracting of drivers has enabled people, the voters, to enjoy ride-share services at much lower costs than before the creation of Lyft and Uber. That joy is now in grave jeopardy of evaporating!



Uber and Lyft are naturally and rightfully appealing the ruling, but with a very low probability of success. California is not friendly to enterprises or anybody trying to earn more income. Lyft and Uber provided a new ride-share service platform that has massively benefited the economy, and their entrance into the market marked an advancement and achievement for civilization. Your beloved California politicians now want to undo that great advancement, just because Lyft and Uber violate unreasonable liberty-violating state labor laws, like AB 5.

I previously wrote about AB-5 here, the newly passed law in California that requires ride-share companies, like Lyft and Uber, to classify their drivers as typical W-2 employees rather than contractors. In November 2020, California voters will have the chance to vote for Proposition 22, which would exempt drivers from the draconian, liberty-violating, conditions of AB 5. Let’s pray it passes, for the sake of ALL Californians, including the ones who voted for these Democrat politicians in California that have passed all these wicked, liberty-violating, laws.

Source: Liberty Forecast Blog

Image: Pixabay

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