Even If California Law Classifies Its Drivers As Employees, Uber Has Options

Uber, Lyft, and DoorDash’s forced arbitration clauses could weaken the effect of the proposed law

Sarah Kessler

Sep 6, 2019·4 min read

A California bill that is on the brink of becoming law threatens the business model of the gig economy. Called Assembly Bill 5 (AB 5), it would make workers for companies like Uber, Lyft, and DoorDash employees under state law, rather than independent contractors, as they are currently classified. That change would legally entitle them to a minimum wage, unemployment insurance, and other benefits.

It’s one thing to pass such a law, but it’s another thing to enforce it. Companies that dispatch workers using smartphone apps typically require those workers to handle disputes outside of court, and those same apps can easily be leveraged to push for exemptions from a law like AB 5.

Tony West, chief legal officer for Uber, told the New York Times late last month that if the bill becomes law, the company will litigate cases “just as we have done for the last decade.” In that case, it would be up to courts to ensure enforcement of the proposed law. The Ubers of the world, however, have effectively shut down one common pathway for challenging their employment practices in court.

Signing up to work for most gig economy apps involves agreeing to settle disputes in arbitration and on an individual basis. This means drivers can’t bring class action lawsuits against Uber or Lyft, and the rulings on their individual cases don’t establish legal precedent. As a result, it would largely be up to government agencies to bring cases against these companies that could force them to reclassify workers according to AB 5.

Though California Governor Gavin Newsom wrote in an op-ed in the Sacramento Bee that he supported AB 5, agencies have discretion in which suits they bring against employers, and the way they enforce the law can change depending on which politicians are in power.

Apps like Uber and Lyft have an extra weapon in their arsenal when it comes to battling for such an initiative: email lists and app notifications.

Veena Dubal, associate professor of law at the University of California, Hastings, says government agencies can be at a disadvantage compared to private lawyers when it comes to bringing class action lawsuits. “Government agencies are more constrained in what they can reveal to the public. They have fewer resources. They’re politically constrained,” she says. “They’re foot soldiers of the governor. It’s not necessarily, in theory, that government agencies are not as capable as enforcing as class action lawsuits, but in practice that’s typically what we’ve seen.”

Drivers could still bring a lawsuit through California’s Private Attorneys General Act, a law that allows workers to sue even if they have signed a mandatory arbitration agreement. Or they could file arbitration demands. “They still can bring suits. They just have to be in arbitration,” says Sharon Block, executive director of the Labor and Worklife Program at Harvard Law School. But, she says, “it does impede [drivers’] ability to be in control and bring a lawsuit in the most effective way that they want to or believe they can.”

In addition to arbitration agreements, Uber, Lyft, and DoorDash have preemptively played defense against AB 5 by pledging $90 million to run a ballot initiative that would essentially exempt them from the proposed law if it passes. The companies did not respond to a request for comment.

Apps like Uber and Lyft have an extra weapon in their arsenal when it comes to battling for such an initiative: email lists and app notifications. “They have so much power in this context, not just because they have the resources — almost $100 million — but they also have the ability to reach drivers in a way that none of us can,” says Dubal, who works with Drivers United — Bay Area, an independent organization of gig economy drivers.

In 2015, as Uber faced a bill that would limit the number of its drivers allowed to operate in New York City, the company created what it called “de Blasio’s Uber,” a spoof feature named after the city’s mayor that showed customers long wait times in a supposed preview of what the service would look like should the bill pass. The feature prompted users to send an email to city hall.

Uber’s response worked — de Blasio dropped the bill. Uber, Lyft, and other sharing economy companies could use their apps in a similar way to lobby against AB 5. Uber and Lyft have already used their apps to dispatch requests for drivers to sign petitions against the bill.

Even though AB 5 might not be a “silver bullet,” Block says, she’s encouraged by the bill and other proposals related to gig worker classification and protections around the country. It’s a “moment when a broad range of policy options are on the table,” she says.

Whatever the policy solutions, passing them will only go so far. Forcing companies to abide is a whole other battle.