Almost but, not yet. Rideshare companies threaten to suspend service in CA.
TECH
Uber and Lyft are threatening to suspend service in California if they have to classify drivers as employees — that tactic may backfire
PUBLISHED FRI, AUG 14 20209:29 AM EDTUPDATED FRI, AUG 14 20201:24 PM EDT
Lauren Feiner@LAUREN_FEINER
KEY POINTS
Dara Khosrowshahi, chief executive officer of Uber Technologies Inc., listens during a panel discussion at the Bloomberg Global Business Forum in New York, U.S., on Wednesday, Sept. 26, 2018.
Mark Kauzlarich | Bloomberg | Getty Images
Uber and Lyft are running out of options in California.
The companies have been fighting to continue classifying their drivers as independent workers, avoiding expenses like healthcare and unemployment insurance for hundreds of thousands of drivers in the state. Last year, they failed to block a bill aimed at classifying gig workers as employees from becoming state law, and then, as of Monday, failed to convince a court the law should not apply to them.
Now, while pledging to appeal the court’s ruling on a preliminary injunction requiring them to reclassify drivers, Uber and Lyft are turning to voters as a last resort. On Wednesday, executives at both companies raised the stakes by threatening to suspend service in California if they can’t get their way. Both stated in court filings that outcome would be practically inevitable in order to restructure their operations if enforcement of the injunction isn’t further postponed.
The companies would likely come back eventually, but it could take until at least November when voters decide their fate at the polls.
Uber and Lyft have each poured $30 million into a ballot measure called Proposition 22, which would exempt drivers for app-based ride-hailing and food delivery services from the employee classification required under the new state law, Assembly Bill 5 (AB5).
That’s a risky move for the money-losing ride-hailing companies whose revenue has suffered during the coronavirus pandemic.
On the one hand, Uber and Lyft may stand to gain from a temporary shutdown if voters realize how much they miss their services by November and vote yes on the proposition. With ridership already down, the companies won’t miss out on their usual revenue, anyway.
On the other hand, Californians who are already fed up with corporate tactics, and have a newfound appreciation for workers laboring through the pandemic, may decide Uber and Lyft should just follow the law as written. Riders and drivers could direct their anger toward the companies if they view them as abandoning the state in the midst of crisis.
Analysts already see drivers as one of the biggest obstacles keeping Uber and Lyft from reaching profitability. If voters decide the companies should compensate workers as employees and become subject to other employer costs like payroll taxes, Uber and Lyft will have to rethink their entire business models or be forced to leave the biggest state in the country.
Uber and Lyft did not provide statements directly on this article but pointed to court filings asking a judge to delay the reclassification for at least the extent of their appeal. The trial judge rejected that request, leaving the companies with about a week left on the stay unless the appellate court says otherwise.
Uber also pointed to a past statement on the preliminary injunction and blog posts about the likely impact of the reclassification. Lyft pointed to an email it sent to drivers Thursday outlining similar points as well as comments by drivers advocating for voters to support the ballot measure to help them maintain flexible work hours.
TECH
Uber and Lyft are threatening to suspend service in California if they have to classify drivers as employees — that tactic may backfire
PUBLISHED FRI, AUG 14 20209:29 AM EDTUPDATED FRI, AUG 14 20201:24 PM EDT
Lauren Feiner@LAUREN_FEINER
KEY POINTS
- Uber and Lyft are turning to voters as a last resort to maintain their status as contractors for drivers in California after a judge granted a preliminary injunction requiring the companies to reclassify drivers as employees.
- Both companies have said they’d be forced to suspend service in the state to reshape their companies around the new model. Once they return, they’ve said they’d likely only be able to hire back a fraction of their workforce under more rigid schedules.
- Labor and business experts and Silicon Valley’s congressman said nothing is stopping Uber and Lyft from providing flexible work even while treating drivers as employees.
Dara Khosrowshahi, chief executive officer of Uber Technologies Inc., listens during a panel discussion at the Bloomberg Global Business Forum in New York, U.S., on Wednesday, Sept. 26, 2018.
Mark Kauzlarich | Bloomberg | Getty Images
Uber and Lyft are running out of options in California.
The companies have been fighting to continue classifying their drivers as independent workers, avoiding expenses like healthcare and unemployment insurance for hundreds of thousands of drivers in the state. Last year, they failed to block a bill aimed at classifying gig workers as employees from becoming state law, and then, as of Monday, failed to convince a court the law should not apply to them.
Now, while pledging to appeal the court’s ruling on a preliminary injunction requiring them to reclassify drivers, Uber and Lyft are turning to voters as a last resort. On Wednesday, executives at both companies raised the stakes by threatening to suspend service in California if they can’t get their way. Both stated in court filings that outcome would be practically inevitable in order to restructure their operations if enforcement of the injunction isn’t further postponed.
The companies would likely come back eventually, but it could take until at least November when voters decide their fate at the polls.
Uber and Lyft have each poured $30 million into a ballot measure called Proposition 22, which would exempt drivers for app-based ride-hailing and food delivery services from the employee classification required under the new state law, Assembly Bill 5 (AB5).
That’s a risky move for the money-losing ride-hailing companies whose revenue has suffered during the coronavirus pandemic.
On the one hand, Uber and Lyft may stand to gain from a temporary shutdown if voters realize how much they miss their services by November and vote yes on the proposition. With ridership already down, the companies won’t miss out on their usual revenue, anyway.
On the other hand, Californians who are already fed up with corporate tactics, and have a newfound appreciation for workers laboring through the pandemic, may decide Uber and Lyft should just follow the law as written. Riders and drivers could direct their anger toward the companies if they view them as abandoning the state in the midst of crisis.
Analysts already see drivers as one of the biggest obstacles keeping Uber and Lyft from reaching profitability. If voters decide the companies should compensate workers as employees and become subject to other employer costs like payroll taxes, Uber and Lyft will have to rethink their entire business models or be forced to leave the biggest state in the country.
Uber and Lyft did not provide statements directly on this article but pointed to court filings asking a judge to delay the reclassification for at least the extent of their appeal. The trial judge rejected that request, leaving the companies with about a week left on the stay unless the appellate court says otherwise.
Uber also pointed to a past statement on the preliminary injunction and blog posts about the likely impact of the reclassification. Lyft pointed to an email it sent to drivers Thursday outlining similar points as well as comments by drivers advocating for voters to support the ballot measure to help them maintain flexible work hours.
