California has been in a standoff with the ride-hailing companies Uber and Lyft over their drivers’ status under the law: whether they are contractors or employees. Now the coronavirus crisis has put a spotlight on a related question: Who is responsible for helping those drivers when there is no work?
The companies are urging their drivers nationwide to apply for emergency unemployment benefits that federal legislation established last month for the self-employed. But there’s a catch in California: The state doesn’t typically consider them self-employed.
Nonetheless, Gov. Gavin Newsom signed an executive order on Wednesday directing the state’s unemployment agency to help workers like Uber and Lyft drivers collect benefits under the federal program, known as Pandemic Unemployment Assistance.
That may put the state at odds with the rules of the federal program. U.S. Labor Department officials have emphasized that only workers ineligible for traditional unemployment benefits can receive the federal pandemic assistance. And under a state law passed last year and some previous determinations, the drivers are considered employees in California and should be able to draw traditional unemployment benefits.
Recourse to such assistance has been hampered, however, by the companies’ refusal to provide routine documentation to the state as they fight the law in court.
The circumstances effectively forced the state to provide unemployment assistance to drivers that they may not be legally entitled to receive, employment experts said.
“The states are caught in a hard place,” said Brian Chen, a lawyer who focuses on the rights of economically insecure workers at the National Employment Law Project, an advocacy group. “They’re trying to do the right thing. But this is what happens when ultrapowerful app companies with an army of well-paid lobbyists and lawyers are saying they’re going to fight to the bitter end against workers’ ability to demand rights under the law.”
The California labor secretary, Julie A. Su, said in an interview that she believed the state’s move to help drivers under the federal program was legal because the government had “emphasized flexibility” in administering the emergency aid.
The U.S. Labor Department did not provide comment for this article.
Allowing drivers to receive the new federal benefits rather than traditional unemployment assistance could help gig-economy companies like Uber and Lyft avoid significant costs in the future. Employers in California and other states are required to contribute to state unemployment trust funds on behalf of employees who might claim benefits.
While employers are not required to make contributions to fund pandemic-related claims, they will have to make contributions after the crisis. In effect, allowing the drivers to claim the federal benefit helps the companies avoid conceding that they are on the hook for funding state benefits.
An Uber spokesman said, “Congress fully funded Pandemic Unemployment Assistance for gig workers so that every state, many of which face historic deficits, could give these workers immediate financial support at no cost to their own funds.”
Uber has also pointed out that the state’s recent law doesn’t make drivers eligible for unemployment benefits on its own. It creates a test that state agencies must apply before granting benefits, and which they have yet to do in many drivers’ cases. Most experts believe that drivers will be deemed employees under the test.
Lyft declined to comment for this article.
California’s action appears to reflect a shift by state officials. Early this month, the state seemed to be trying to process benefits for Uber and Lyft drivers under the traditional unemployment system. On a website listing frequently asked questions by workers applying for benefits during the pandemic, it instructed gig workers to “list your gig employer as your last employer.” Workers who have employers would typically be eligible for traditional unemployment benefits and therefore ineligible for federal pandemic assistance for the self-employed.
Last week, Uber, Lyft and another gig company, DoorDash, sent an email to government officials asking the state agency overseeing unemployment insurance to remove that sentence from its website and to help gig workers apply for Pandemic Unemployment Assistance.
“Many self-employed ride-share and delivery drivers intend to apply for loans and other federal relief available to independent contractors,” the companies wrote, and they “worry that making an inaccurate representation that they are employees” could preclude that, the email said.
Ms. Su, the state labor secretary, said the purpose of the new approach was to ensure that struggling gig workers could begin to receive benefits rapidly. While some Uber and Lyft drivers had successfully claimed regular unemployment benefits in California before the executive order, the process took months because the companies refused to submit income data needed to verify eligibility.
“People are in very dire straits,” Ms. Su said. “They need these benefits. We’ve made it a priority to get them out.”
Andrew Stettner, an expert on unemployment insurance at the Century Foundation, a liberal think tank, said that the U.S. Labor Department could order California to desist but that it was unlikely to require the state to pay back money it had given to drivers.
States are sometimes tempted to push boundaries because the Labor Department “hasn’t always stood up to them,” Mr. Stettner added. “It’s not a very aggressive oversight agency.”
Some groups, like the California Labor Federation, had pressed the state to expedite traditional unemployment benefits for gig workers, an approach that experts like Mr. Stettner said they believed the state could take.
But Ms. Su said there was no way to expedite unemployment benefits for drivers under the traditional program without income data from Uber and Lyft. By contrast, under the rules of the pandemic assistance program, the self-employed and other eligible workers can begin receiving assistance quickly, even before documenting their income.
Ms. Su said that she had spoken with representatives from Uber and Lyft about the state’s approach but that the companies did not directly make the case for the action the state took.
In addition to California, at least three states — Illinois, New York and New Jersey — have deemed at least some Uber and Lyft drivers eligible for regular unemployment insurance. But Uber and Lyft are contesting these decisions in many states and are not paying into the state unemployment insurance funds.
If drivers in these states receive federal pandemic assistance rather than traditional unemployment benefits, it could help reduce the financial liabilities of companies like Uber and Lyft by tens of millions of dollars after the crisis passes.
Mr. Newsom did take some steps at odds with the positions of Uber and Lyft. His executive order made clear that the state law effectively requiring gig companies to classify drivers as employees still applied, entitling drivers to all protections of employment, like minimum-wage rules, overtime pay, workers’ compensation and paid sick leave.
He also said that the companies must hand over income data for their drivers, though it was unclear how he planned to enforce that demand.
“We don’t take any enforcement options off the table,” Ms. Su said when asked about the possibility of litigation.