Ride-hailing giant Uber Technologies Inc and delivery company Postmates Inc have filed a lawsuit against the state of California, claiming a new law that would treat gig-economy freelancers as employees is unconstitutional.
The legislation, known as Assembly Bill 5 and was due to go into effect yesterday, would mean that — under certain conditions — independent contractors are classified as employees and granted the minimum salary and health insurance benefits that entail.
This would include drivers for Uber and Postmates.
Photo: AP
“Plaintiffs bring this lawsuit to protect their constitutional rights and defend their fundamental liberty to pursue their chosen work as independent service providers and technology companies in the on-demand economy,” the lawsuit filed on Monday said.
Uber warned earlier that it would oppose any change of status for its drivers, which would cost the company extra in social security costs.
In the suit, Uber and its co-plaintiffs argue that the law targets independent service providers, while exempting direct salespeople, travel agents, construction truck drivers and commercial fishers.
“There is no rhyme or reason to these nonsensical exemptions,” it said.
Uber and its US rival, Lyft Inc, have each put aside US$30 million to organize a referendum, allowed under Californian law, to replace the legislation with a compromise on social rights that has been put before the state governor.
Drivers are divided between those who want the same security as employees and those who want the flexibility of being able to choose the hours they work.
The gig economy has given drivers “opportunities to earn money when and where they want, with unprecedented independence and flexibility,” the lawsuit said.
California is one of Uber’s key markets, with about 9 percent of its sales on ride and delivery platforms made in the state, CNBC said, citing Uber chief executive officer Dara Khosrowshahi.
The new law came as the ride-hailing company is also facing legal clampdowns on its operations elsewhere.
A German court early last month ruled that Uber — which relies heavily on the use of vehicles from local car rental companies in the country — must have a rental car license of its own to operate.
In November, London’s transport authority refused to renew the company’s operating license because of safety and security concerns.
That came as a big blow to Uber, which has about 3.5 million customers and about 50,000 drivers in the British capital.
It has said it will appeal the decision.
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