Uber, Lyft ‘essentially ignore US labor laws’: employment expert

The coronavirus pandemic has shone a spotlight onto service workers who stock grocery shelves, prepare coffee and deliver food. But society’s reliance on their work hasn’t translated into protections or benefits for the workers themselves.

Many of these essential employees, who work for behemoths like Uber (UBER), Lyft (LYFT), Grubhub (GRUB), DoorDash, Instacart and Postmates, are part of the so-called gig economy.

“The trouble with these companies is that they choose to misclassify their workers and by doing so, they essentially ignore U.S. labor laws. In other words, if you're a worker and you work for an Uber or an Instacart or a Postmates, you do not get benefits associated with work. In other words, the minimum wage doesn't apply to you. Overtime doesn't apply to you. You don't get unemployment insurance and you don't get workers' comp,” said Aquent CEO John Chuang in an interview with Yahoo Finance’s On the Move.

Aquent is a staffing company that matches 10,000 temporary employees with large companies every year, primarily in creative and marketing industries.

“Sort of the worker norms that we held for granted for literally 100 years have been sort of ignored by these companies. And these companies are getting a lot of flack for it and a lot of dissatisfaction. With the pandemic, it's especially important because none of these workers get sick pay. Of course, if they don't get sick pay, then there is an economic incentive to go to work even though you're not feeling well. And it becomes a public health issue,” he added.

Gig workers have been able to file for unemployment for the first time ever because of the pandemic’s devastating effects, but it’s hardly a panacea for the deep cracks in the system.

Citing companies like Starbucks (SBUX), McDonald’s (MCD) and Walmart (WMT) that have provided one-off bonuses and temporary pay increases during the pandemic, Chuang said companies like Uber and Lyft have no excuse to not take care of their employees.

A ‘third tier’ of workers

Meanwhile, the state of California signed Assembly Bill 5 into law earlier this year, mandating companies in the gig economy to reclassify their workers as employees. Now California’s attorney general and the city attorneys of Los Angeles, San Diego and San Francisco have sued Uber and Lyft for defying the law. The ride-hailing startups have pledged $60 million to push a ballot initiative that would create a third category of worker classification, essentially making them exempt from AB5.

Assemblywoman Lorena Gonzalez, D-San Diego, speaks at a rally after her measure to limit when companies can label workers as independent contractors was approved by a Senate committee, in Sacramento, Calif., Wednesday, July 10, 2019. The measure, AB5, is aimed at major employers like Uber and Lyft. (AP Photo/Rich Pedroncelli)

“The California ballot initiative we support would allow companies to pay into specific benefits while protecting independent flexible work. We recently delivered the signatures needed to qualify the ballot initiative and it is progressing well,” Lyft CEO Logan Green said during its first-quarter conference call on May 6. “As we track public opinion around the proposal, we are finding significant and growing support. This is an excellent opportunity for us to establish a new model that both addresses this need for flexibility along with important benefits.”

“This is almost outrageous sometimes when you think about it. First of all, California passed a law specifically to say, ‘Hey, gig economy companies, you have to follow the law. You have to do the things that every other employer in the state does like pay labor taxes and pay payroll taxes.’ And even after the law is passed, they refuse to do it,” said Chuang.

“What [Uber and Lyft] are trying to do by creating this third tier, this special set of rules that just apply to them, is utterly ridiculous and unfair,” he added.

Of course, Uber and Lyft pouring money into fighting AB5, is about cost savings. Barclays estimates that classifying California drivers as employees could cost Uber $500 million and Lyft $290 million annually.

Melody Hahm is Yahoo Finance’s west coast correspondent, covering entrepreneurship, technology and culture. Follow her on Twitter @melodyhahm.

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