Uber attorney Theodore J. Boutrous Jr. said that “Uber would have to turn into a different company” if the ruling went through. “That is a drastic thing to order.”
The judges also questioned the attorney representing the state on its case that Uber and Lyft are out of compliance with the law.
The hearing Tuesday is in response to a California Superior Court judge in San Francisco ordering the companies in August to comply with wage and unemployment requirements following Assembly Bill 5, the law signed last year aimed at making certain categories of gig workers employees. The ruling was stayed while the companies appealed.
The companies have employed numerous strategies to maintain drivers’ status as independent contractors. One such measure, Proposition 22, will come before the voters in November’s general election. It seeks to codify workers’ status as independent contractors in a law that would require a seven-eighths legislative supermajority to overturn.
Uber and Lyft are seeking to prove that the changes imposed by AB5 would fundamentally alter their businesses in a manner from which they could not recover. The companies say employment would lengthen wait times and raise fares, as well as require them to potentially exit some markets, because employment would threaten the flexibility to quickly onboard and dispatch drivers that they regard as central to their apps.
During the hearing Tuesday, Uber sought to create some daylight between itself from rival Lyft, arguing that it had enacted changes that gave drivers independence such as allowing them limited flexibility to set their own prices and allowing riders to request trips with a specific driver. That would make drivers something akin to their own hiring entity. The company also argued that its case should be weighed separately from Lyft.
Lyft attorney Rohit K. Singla, meanwhile, disputed the contention that the legislature’s action was targeted at Uber and Lyft at all, renewing a question over whether AB5 should apply to the companies.
But the judges turned to wages, signaling a looming question regarding the companies’ positions that they are not subject to minimum wage requirements. Drivers are not paid for time they spend waiting for a ride, which research has said constitutes a third of their time.
“Are you suggesting that the specter of thousands of individual claims for back wages is something that is insignificant and something that need not be considered in balancing the appropriateness of an injunction at this point?” Justice Stuart R. Pollak asked.
There are also looming questions about how the employment requirement would affect drivers. Uber and Lyft say the majority of drivers do not want to be employees, and some prize flexibility over the guarantees created by employment.
Matthew Goldberg, deputy attorney in the San Francisco city attorney’s office, said there are cases where people would want to accept work for less than minimum wage, he said. But doing so is prohibited in California, he added, as it creates downward pressure on wages overall.
Uber and Lyft say there isn’t proof of drivers making less than the minimum wage.
The justices are expected to rule on the case in coming months. But the general election could address the question separately much earlier, on Nov. 3.