Uber, Lyft, HopSkipDrive and Zum jointly filed papers challenging the authority of the California Public Utilities Commission to determine that their drivers are employees.

www.sfchronicle.com/business/article/Uber-and-Lyft-say-regulator-can-t-make-drivers-15380707.php

Uber and Lyft may be headed for a showdown with the California agency that regulates them.

The San Francisco ride-hailing companies, along with two smaller ride services for children called HopSkipDrive and Zum, on Tuesday filed papers challenging the authority of the California Public Utilities Commission to determine that their drivers are employees.

At issue is a June 9 “scoping memo” from agency commissioner Genevieve Shiroma that said “for now, TNC drivers are presumed to be employees,” using the acronym for transportation network companies, which is what the commission calls on-demand ride services. A scoping memo is a mechanism to identify future issues rather than a formal decision.

The scoping memo’s reason was AB5, California’s new gig-work law that makes it harder to companies to claim that workers are independent contractors, as the ride-hailing companies classify their drivers. The scoping memo and a June 2 letter from a director at the commission said the ride services must provide workers’ compensation for their drivers under AB5, which set a July 1 deadline for that insurance coverage.

“No such finding (that drivers are employees) was or could be made by the Assigned Commissioner, or even by the full Commission,” the four ride companies wrote in a motion filed Tuesday. “There is a substantial risk that the Scoping Memo will be misinterpreted, and that the ultimate decision in this proceeding will be based on an erroneous legal foundation.”

The four companies said they want the commission to clarify that the scoping memo statement “is not a determination that drivers who use the TNCs’ (software and services) are employees.” They also want Shiroma, the scoping memo’s author, to clarify that “she did not reach — nor is authorized to reach — any decision finding that all TNCs are obligated to provide workers’ compensation insurance for drivers.”

Uber and Lyft fiercely reject any contention that AB5 means they must reclassify drivers as employees, and are battling that possibility in the courts and with a November ballot measure.

Now they are also battling the state commission that regulates them.

The motion said the commission lacked any authority under AB5 to make decisions or findings on drivers’ employment status. Instead, that authority rests with courts, it said, referring to a misclassification lawsuit against Uber and Lyft by the state attorney general and city attorneys.

Moreover, the memo was written by a single commissioner, who “lacks authority to resolve a contested issue of substantive law,” the companies wrote. Only the full commission could determine that, they said, and that would require hearings, public input and a formal board vote. The companies said they have a right to present their own “substantial evidence” about why they believe AB5 does not apply to them.

Moreover, they said, the commission already waived its oversight about driver status. In 2013 it wrote that it would not “meddle in their business model by forcing TNCs to designate each driver an employee or contractor.”

The commission did not reply to requests for comment on the companies’ motion. Before the filing was submitted, spokeswoman Terrie Prosper said in a email that it “expects all carriers to comply with the workers’ compensation insurance requirements and will determine a course of action if and when it discovers that a (ride-hailing company) is out of compliance with those requirements.”

“Because AB5 deems (ride-hail) drivers to be employees, the (agency) must ensure that (the companies) comply with those requirements applicable to employees,” Prosper said in an earlier email.

Uber and Lyft both said their focus is on the ballot measure which would keep drivers as independent contractors while entitling them to some benefits and earnings guarantees.

“In the meantime, we are seeking further clarification from the (commission) around their flawed presumptions,” Lyft spokeswoman Julie Wood said in an email.