Lyft, Uber May Pause California Operations if Forced to Reclassify Drivers
Written by SOURCE on August 13, 2020
Lyft and Uber have threatened to suspend services in California if the state forces them to change the employment status of their drivers.
The companies made the announcements Wednesday, just days after a California judge granted a preliminary injunction that prohibited Lyft and Uber from classifying their drivers as independent contractors instead of employees. The move was applauded by union leaders and lawmakers, who say the employment status would allow Uber and Lyft drivers to receive benefits like sick leave and overtime pay. The ride-hailing companies, however, pushed back against the ruling, insisting their drivers prefer having contractor status because it affords them more flexibility.
“If the court doesn’t reconsider, then in California, it’s hard to believe we’ll be able to switch our model to full-time employment quickly,” Uber CEO Dara Khosrowshah told MSNBC on Wednesday.
The companies were given 10 days to appeal the ruling before it goes into effect. As pointed out by The Verge, Lyft, Uber, Doordash, Instacart, and Postmates are funding Proposition 22, a ballot measure that would make gig workers exempt from Assembly Bill 5. The new state law presents an “ABC Test” that determines whether workers should be classified as an employee or contractor.
Under the ABC test, a worker is considered an employee and not an independent contractor, unless the hiring entity satisfies all three of the following conditions:
- The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
- The worker performs work that is outside the usual course of the hiring entity’s business; and
- The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
“If our efforts here are not successful it would force us to suspend operations in California,” Lyft Presiden John Zimmer said Wednesday during a second quarter earnings call. “Fortunately, California voters can make their voices heard by voting yes on Prop 22 in November.”
According to the Los Angeles Times, Lyft reported revenue dropped 61 percent to $339 million during the second quarter. Uber also reported a huge second-quarter loss last week, confirming revenue decline of 20 percent to $2.18 billion. Uber, however, saw a surge in its food delivery service, which was a result of the nationwide coronavirus lockdowns.
