Uber and Lyft may be headed for a showdown with the California agency that regulates them.
The San Francisco ride-hailing companies, along with two smaller ride services for children called HopSkipDrive and Zum, on Tuesday filed papers challenging the authority of the California Public Utilities Commission to determine that their drivers are employees.
At issue is a June 9 “scoping memo” from agency Commissioner Genevieve Shiroma that said “for now, TNC drivers are presumed to be employees,” using the acronym for “transportation network companies,” which is what the commission calls on-demand ride services. A scoping memo is a mechanism to identify future issues rather than a formal decision.
The scoping memo’s reason was AB5, California’s new gig-work law that makes it harder for companies to claim that workers are independent contractors, as the ride-hailing companies classify their drivers.
The scoping memo and a June 2 letter from a director at the commission said the ride services must provide workers’ compensation for their drivers under AB5, which set a July 1 deadline for that insurance coverage.
“No such finding (that drivers are employees) was or could be made by the Assigned Commissioner, or even by the full Commission,” the four ride companies wrote in a motion filed Tuesday. “There is a substantial risk that the Scoping Memo will be misinterpreted, and that the ultimate decision in this proceeding will be based on an erroneous legal foundation.”
The four companies said they want the commission to clarify that the scoping memo statement “is not a determination that drivers who use the TNC’s (software and services) are employees.” They also want Shiroma, the scoping memo’s author, to clarify that “she did not reach — nor is authorized to reach — any decision finding that all TNCs are obligated to provide workers’ compensation insurance for drivers.”
Terrie Prosper, a spokeswoman for the utilities commission, said in an email that it “cannot speak to how it will address motions while we deliberate.”
However, she said, “All major TNCs have evidence of workers’ compensation insurance currently on file with the (commission). The (commission) continues to evaluate TNC compliance with workers’ compensation insurance requirements and will take action as appropriate.”
Uber and Lyft fiercely reject any contention that AB5 means they must reclassify drivers as employees, and are battling that possibility in the courts and with a November ballot measure.
Now they are also battling the state commission that regulates them.
The motion said the commission lacked any authority under AB5 to make decisions or findings on drivers’ employment status. Instead, that authority rests with courts, it said, referring to a misclassification lawsuit against Uber and Lyft by the state attorney general and city attorneys.
Moreover, the memo was written by a single commissioner, who “lacks authority to resolve a contested issue of substantive law,” the companies wrote. Only the full commission could determine that, they said, and that would require hearings, public input and a formal board vote. The companies said they have a right to present their own “substantial evidence” about why they believe AB5 does not apply to them.
Moreover, they said, the commission already waived its oversight about driver status. In 2013, it wrote that it would not “meddle in their business model by forcing TNCs to designate each driver an employee or contractor.”
“Because AB5 deems (ride-hail) drivers to be employees, the (agency) must ensure that (the companies) comply with those requirements applicable to employees,” Prosper, the commission spokeswoman, said in an earlier email.
Uber and Lyft both said their focus is on the ballot measure, which would keep drivers as independent contractors while entitling them to some benefits and earnings guarantees.
“In the meantime, we are seeking further clarification from the (commission) around their flawed presumptions,” Lyft spokeswoman Julie Wood said in an email.
“If California regulators go beyond their authority to force this misguided policy, it would threaten continued access to this work, and undermine the reliability and affordability of these essential services that Californians depend on,” Uber said in a statement.
The utilities commission already waded into the driver classification issue late last year. In an order on Dec. 19, Robert Mason, an administrative law judge with the commission, asked Uber and Lyft for detailed responses on why they think their drivers should not be employees. That order requested comments in late July and reply comments in early August.
“There is a possibility, as with all proceedings, that staff proposals are issued for further comment or follow-on workshops scheduled,” Prosper said. “A proposed decision may be issued after we hear from parties, review the comments, and determine if anything else may be necessary to develop the record.”
Nick Trahair, CLM,CHA serves as General Manager of the GrandStay Hotel & Suites of Traverse City, MI.
Prior to joining the staff at the GrandStay, he served as the Regional Operations Manager for a large hospitality management company based in the Midwest and also has worked in the food and beverage management field.