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California Lodges Lawsuit Against Uber and Lyft for “Misclassifying” Drivers as Gig Workers, Not Employees

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  • California Attorney General Xavier Becerra filed a lawsuit on Tuesday against the ride-sharing companies Uber and Lyft.
  • The lawsuit alleges that the companies are violating state law by classifying drivers as contractors, not employees.
  • Notably, employee status could give drivers access to minimum wage and health benefits.
  • Uber and Lyft have argued that their business model is in technology, not rides. They have also argued that their drivers enjoy the independence given to them by being classified as contractors. 

California Sues Uber and Lyft

After passing a law aiming to reclassify over a million independent contractors as employees, California is taking that mission one step further by suing Uber and Lyft for their defiance to do so. 

California Attorney General Xavier Becerra filed the lawsuit on Tuesday. He was joined by a coalition of city attorneys, including those for San Francisco, Los Angeles, and San Diego.

In the lawsuit, Becerra alleges Uber and Lyft violated state law by classifying their drivers as independent contractors (AKA, “gig” workers) when they should actually be classified as employees.

“…Uber’s and Lyft’s misclassification of drivers deprives workers of critical workplace protections such as the right to minimum wage and overtime, and access to paid sick leave, disability insurance, and unemployment insurance,” the coalition said in a statement

The statement goes on to say that they are seeking “restitution for workers, a permanent halt to the unlawful misclassification of drivers, and civil penalties that could reach hundreds of millions of dollars.” 

If found guilty of violating the law, the riding-share companies could be forced to pay driver backwages, as well as fines for not paying state payroll taxes. Becerra has accused the companies of harming California taxpayers by avoiding “hundreds of millions of dollars in social safety net obligations.”

According to the lawsuit itself, Uber and Lyft utilized “…the illegitimate savings they gain from depriving their Drivers of the full compensation and benefits they earn as employees to offer their ride-hailing services at an artificially low cost, decimating competitors and generating billions of dollars in private investor wealth off the backs of vulnerable Drivers.”

Part of the reason Becerra and those other attorneys are saying these companies’ actions are illegal is because last year, California passed a law known as Assembly Bill 5. Notably, that law requires companies to treat their workers as employees instead of contractors if those companies control how workers perform tasks, or if their work is a routine part of the company’s business.

When A.B. 5 was drafted, it specifically targeted companies like Uber and Lyft. Since it went into effect on Jan. 1, both companies have resisted adhering to it. In fact, both Uber and Lyft, as well as DoorDash, have pumped $90 million into a campaign for a ballot initiative to exempt them from that law. 

Uber and Lyft Respond to Lawsuit

For its part, Uber has argued that its business lays in its technology, not its rides. Because of that, it has argued that drivers are not a routine part of its business. 

Both it and Lyft have also argued that their drivers prefer being independent and deciding when they work. 

According to a spokesperson, Uber plans to contest the lawsuit, saying that at the same time, it will push “to raise the standard of independent work for drivers in California, including with guaranteed minimum earnings and new benefits.”

“At a time when California’s economy is in crisis with four million people out of work, we need to make it easier, not harder, for people to quickly start earning,” the spokesperson added.

In its own statement, Lyft seemed to be less critical of lawsuit, saying the company is “…looking forward to working with the Attorney General and mayors across the state to bring all the benefits of California’s innovation economy to as many workers as possible, especially during this time when the creation of good jobs with access to affordable healthcare and other benefits is more important than ever.”

Could Ride-Sharing Drivers Be Classified in the Future?

Even though these companies are resisting this lawsuit, labor experts say other states with similar laws may also start to take action against them.

“Uber and Lyft have lived a kind of charmed life in terms of escaping law enforcement generally, and particularly with regard to employment law, Stanford law professor William B. Gould IV told The New York Times. “The attorney general’s action can’t help but have a positive influence on law enforcement generally against them.”

Despite Uber and Lyft saying their drivers like the independent model, California’s lawsuit still claims that those companies have enough control over drivers to classify them as employees.

“They hire and fire them,” it reads. “They control which drivers have access to which possible assignments.” 

“Uber and Lyft are transportation companies in the business of selling rides to customers, and their drivers are the employees who provide the rides they sell,” the lawsuit goes on to say. “The fact that Uber and Lyft communicate with their drivers by using an app does not suddenly strip drivers of their fundamental rights as employees.”

While the idea of independent hours and extra money is likely true for some of the companies’ drivers, for others, the work is a vital source of income. 

Facts like that have been made all the more evident since the coronavirus lockdown as many gig workers have struggled to claim unemployment or sick pay. In March, Congress included special provisions in the CARES Act to help gig workers receive unemployment benefits.

Still, even if a company like Uber doesn’t want to go all the way by classifying its drivers as employees, it does seem to agree that some level of change needs to be made on behalf of its drivers. 

In March, CEO Dara Khosrowshahi penned a letter to President Donald Trump asking for a new, third classification. Notably, that would mean drivers would be neither employees nor contractors. Under that potential classification, drivers would not see full employment benefits, though they would be provided with some health benefits.

The news of California’s lawsuit comes as Uber announced it was laying off 3,700 people on Wednesday, roughly 14% of its jobs. Additionally, Khosrowshahi has pledged to waive his base salary for the rest of the year.

That’s also on top of Lyft last week saying that it was cutting 17% jobs, putting hundreds of workers on unpaid furloughs, and trimming salaries.

See what others are saying: (The New York Times) (CNN) (NPR)

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Hundreds of Businesses and Celebrities Join Growing Fight Against Restrictive Voting Efforts

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  • In a letter published Wednesday, hundreds of major companies, law firms, corporate leaders, and celebrities banded together “to oppose any discriminatory legislation or measures that restrict or prevent any eligible voter from having an equal and fair opportunity to cast a ballot.”
  • The list of signatories includes companies like Facebook, Twitter, and Amazon; celebrities such as Demi Lovato, Katy Perry, and Samuel L. Jackson; and billionaire investor Warren Buffet, among others.
  • Though the letter does not address any specific voting legislation, it was organized by Kenneth Chenault and Kenneth Fraizer, who also organized a letter late last month in which more than 70 Black executives urged companies to take a stand against GOP-led restrictive voting proposals being floated in dozens of states. 

Hundreds of Companies Oppose Restrictive Voting 

The number of companies speaking out against a series of GOP-led voting proposals is growing, despite calls from notable Republicans for boycotts against companies doing so.

In a letter published Wednesday morning, hundreds of major companies, law firms, corporate leaders, and celebrities united behind what journalist David Gelles described as “the biggest show of solidarity to date.”

The letter itself doesn’t specifically call out Republican voting efforts. Instead, the statement reads, “We stand for democracy,” with the signatories also vowing “to oppose any discriminatory legislation or measures that restrict or prevent any eligible voter from having an equal and fair opportunity to cast a ballot.”

Still, the letter comes in the middle of an ongoing battle between corporate America and the GOP, which is backing dozens of state proposals that many have condemned as restrictive and discriminatory against poorer individuals and people of color.

The slew of companies that signed Wednesday’s letter includes Target, Netflix, Bank of America, Facebook, Twitter, Microsoft, Starbucks, Amazon, Mastercard, American Airlines, United Airlines, and others. 

The letter also boasts star-power from celebrities like Demi Lovato, Katy Perry, Gwyneth Paltrow, George Clooney, and Samuel L. Jackson, among others. Notably, billionaire investor Warren Buffet also added his name to this list.

Companies Debate Taking Action Against States That Pass Restrictive Voting Measures

Wednesday’s letter was organized by Kenneth Chenault and Kenneth Frazier, who late last month also organized a similar letter from a group of more than 70 Black executives. That message, which urged companies to speak out against the GOP-led proposals, has largely been credited with helping to catalyze the fight between the GOP and corporate America. 

This past weekend, the two also partially led a Zoom call that featured over 120 CEOs and business leaders. 

During that call, participating executives considered a number of possible steps, including pulling donations to politicians who support restrictive voting measures, refusing to move business or jobs to states that pass such laws, and even relocating events; however, no hard plans were actually set into motion.

Still, some groups have already gone forward with various forms of protests against such laws. Last week, Major League Baseball announced it was moving its All-Star game out of Georgia, which recently passed a series of restrictive voting measures. On Monday, actor Will Smith and director Antoine Fuqua also announced that they no longer plan to film their runaway slave thriller “Emancipation” in the state.

Some Companies Didn’t Speak Out in Wednesday’s Letter

Both federal and state Republicans have been very vocal as businesses have continued to lob criticism at their proposed laws. 

Last week, Senate Minority Leader Mitch McConnell warned businesses to “stay out of politics,” though he later walked back that statement.

Two weeks ago, the Georgia state House voted to strip Delta Airlines of its tax breaks after the company spoke out against the state’s new voting laws. In fact, that reprimand might explain why it and other Georgia-based companies like Coca-Cola were absent from Wednesday’s letter. 

According to The New York Times, people involved in the process of organizing this letter said those companies feared more blowback and also did not feel the need to speak up again.

Connected to that, The Times reported that some companies originally tried to have the line of “oppos[ing] any discriminatory legislation” removed, but they later signed anyway after Chenault and Frazier insisted the line was crucial.

See what others are saying: (The New York Times) (The Washington Post) (The Hollywood Reporter)

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Nike To Clean and Resell Used Sneakers at a Discounted Price

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  • At least 15 Nike retail locations in the U.S. are participating in a new program the company calls “Nike Refurbish,” which is aimed at reducing waste.
  • As part of it, Nike will restore shoes with manufacturing flaws, as well as donated or returned shoes, and resell them at a discounted price.
  • Shoes at the end of their wear will be recycled into Nike Grind materials that are used to construct running tracks, gym floors, playgrounds, other Nike products, and more.

Nike Refurbish

Nike announced a new program on Monday called “Nike Refurbish” that will help boost sustainability and reduce waste.

As part of the program, the brand will take donated and returned shoes that are like new or gently used, as well as shoes with cosmetic manufacturing flaws, then clean and restore them to resell at a discounted price. Returned shoes must have been brought back within Nike’s 60-day return period in order for them to be resold. 

Nike employee restoring an eligible pair of sneakers. Source: Nike

All the refurbished shoes will have labeling on the box with information about their condition grade. Plus, they are also covered under Nike’s 60-day return policy. 

Nike Refurbished Footwear Sustainability Initiative | Well+Good
Source: Nike

Nike’s Recycling Efforts

Nike didn’t say what it previously did with returned sneakers in its announcement, but the new plan is part of its wider attempts to recycle materials.

On its website, it markets the initiative as a way for customers to “help keep shoes out of landfills.” and join Nike’s efforts towards, “Zero carbon and zero waste to help protect the future of sport.” 

Shoes that are truly at the end of their wear will be recycled into Nike Grind materials that are then used for tons of other projects, including running tracks, gym floors, playgrounds, outdoor courts, as well as other Nike apparel and footwear.

Nike Grind | Nike Purpose
Nike Grind material that was used to create an outdoor track. Source: Nike

So far, 15 Nike retail locations across the U.S. are confirmed to be participating in this model, but there are plans in place to expand this list over the course of 2021.

See what others are saying: (FOX Business) (Footwear News) (Miami Herald)

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Uber Sees Record Ride Demand But Doesn’t Have Enough Drivers Available

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  • Demand for Ubers outpaced driver availability in March, according to a Monday statement from Uber.
  • On top of seeing its best-performing month since the beginning of pandemic closures, the company also received more bookings last month than any other month in its entire history.
  • In an attempt to attract more drivers, Uber announced a $250 million, one-time stimulus payment last week to “boost” driver earnings.
  • While Uber said it believes it will turn a profit for 2021, the company could be set back more than $500 million because of a U.K. Supreme Court ruling that gives the country’s drivers minimum wage, holiday pay, and pension.

Uber Posts Record-Setting Growth

Uber announced Monday that its ride requests for the month of March were the highest it has ever recorded in its 12-year history. 

According to a filing with the SEC, last month, the company crossed “a $30 billion annualized Gross Bookings run-rate.” Alongside that, average daily Gross Bookings grew 9% from the previous month. 

Notably, this also marked the company’s best month since March of last year, when pandemic closures began in the U.S.

On top of that, Uber said its delivery business crossed “a $52 billion annualized Gross Bookings run-rate in March, growing more than 150% year-over-year.”

In fact, that demand over the past month was so high that Uber didn’t have enough drivers to meet it.

As vaccination rates increase in the United States, we are observing that consumer demand for Mobility is recovering faster than driver availability, and consumer demand for Delivery continues to exceed courier availability,” the company said.

$250 Million Driver Stimulus

Monday’s filing is in line with another announcement from Uber, which said last week that it is opening up a $250 million driver stimulus to “boost” earnings for drivers. 

“In 2021, there are more riders requesting trips than there are drivers available to give them—making it a great time to be a driver,” the company said at the time. “We want drivers to take advantage of higher earnings now because this is likely a temporary situation.”

“As the recovery continues, we expect more drivers will be hitting the road, which means that over time earnings will come back to pre-Covid levels.”

Can Uber Become Profitable?

In February, Uber reported $6.8 billion in losses for 2020, and for years, many have questioned if its business model is even profitable at all; however, in this latest filing, Uber said it believes it’ll become profitable by the end of 2021.

That said, last month, the Supreme Court of the United Kingdom handed drivers a major win by ruling that they need to be reclassified as “workers,” guaranteeing them minimum wage, holiday pay, and pension. 

While big news, the U.K. classifies “workers” and “employees” separately. As a result, U.K. drivers still aren’t granted full benefits. 

The decision will also likely be a setback for Uber, as Bank of America has estimated that it could cost the company more than $500 million. 

Uber’s Vaccine Access Fund

In other Uber news, the company — along with PayPal and Walgreens — has launched a “Vaccine Access Fund.”

Through that fund, customers can donate money that will be used to help people who normally lack transportation get to their vaccination appointment.

Notably, all three companies have said they’ll donate a joint $11 million. 

That’s on top of the $5 million PayPal previously donated, as well as the 10 million free and discounted rides Uber promised to give in December. 

Uber users are able to donate in-app, and PayPal has launched a donation page on its website.

See what others are saying: (The Wall Street Journal) (CNBC) (CNET)

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