(CNN Business)Uber and Lyft were hit with a fresh lawsuit on Tuesday by California Attorney General Xavier Becerra and a coalition of city attorneys who allege the companies are misclassifying their workers in violation of a new state law.
Under the California law, which went into effect on January 1 and is known as Assembly Bill 5 or AB-5, companies must prove workers are free from company control and perform work outside the usual course of business in order classify workers as independent contractors rather than employees.
The lawsuit, filed in San Francisco County Superior Court, accuses Uber and Lyft of depriving workers of protections, including a minimum wage, overtime, paid sick leave, and unemployment insurance, that they would be entitled to as employees.
"Californians who drive for Uber and Lyft lack basic worker protections — from paid sick leave to the right to overtime pay. Uber and Lyft claim their drivers aren't engaged in the companies' core mission and cannot qualify for benefits," said Becerra in a statement. "Sometimes it takes a pandemic to shake us into realizing what that really means and who suffers the consequences."
The lawsuit seeks restitution for the workers as well as civil penalties that, taken together, could amount to hundreds of millions of dollars.
Weeks before the law went into effect, Uber began making a number of product changes to its app in California with the stated promise of letting drivers "reap the full independence" of the platform. Both companies have put millions of dollars into fighting the AB-5 law. Uber, Lyft and DoorDash have each put $30 million behind a ballot initiative, with additional support from Postmates and Instacart. If passed, it would exempt them from the new AB-5 law, but offer drivers some benefits.
While Uber's chief legal officer said last fall the company believed that the new test imposed by the AB-5 bill would not require it to reclassify its fleet of drivers in the state as employees, both Uber and Lyft indicated in their 2019 IPO filings that classifying drivers as employees would "significantly alter" or "fundamentally change" their business models.
An Uber spokesperson said in a statement the company plans to "contest this action in court, while at the same time pushing 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 statement said.
A Lyft spokesperon said in a statement to CNN Business that it 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."
