An appeals court has allowed ride giants Uber and Lyft to continue their drivers as independent contractors while performing their work through an appeals court.
The two companies had threatened that if a decision went into effect on Friday morning they would be forced to treat all their drivers as employees, a change they said would be impossible to complete overnight.
Lyft told riders and drivers in a Thursday blog post that he planned to stop providing rides in California before midnight tonight until the court gave a moratorium on the pending case. Uber CEO Dara Khosroshahi reiterated that the company would have no option to stop providing rides to California if state laws go into effect, as the company cannot afford to hire 50,000 drivers because Employees are quick enough to follow.
The shutdown would be a major setback for two companies that still have not proven they can make money, even they have reduced their expenses by treating drivers as independent contractors, who are using their full-time employees Do not receive the same benefits as.
California is a large part of the businesses of both companies. It accounted for 9% of Uber’s rides worldwide, allowing people to avoid traveling. The state is even more important for Lyft, which does not operate outside of the US other than Canada. California rode 21% Lyft before the epidemic, but the figure dropped to 16% in the April-June period as more people stayed at home and had few places to go.
The unavailability of two ride-hailing services would have given another blow to California’s economy, taking away the salaries of Uber and Lyft drivers, while making it more difficult for people without cars. That’s why the mayors of San Diego and San Jose, California – two of the state’s three largest cities – joined forces this week and urged the appeals court to stop the law from going into effect.
Faulkner and San Jose Mayor Sam Licordo, Mayor of San Diego, Republic, said, “Being forced into a situation where shutting down the service is the only viable option when all of us Californians need to pull together to complete the union . “, A Democrat.
The two companies sought a moratorium on an August 10 court ruling stating that they should start treating their drivers as employees, not independent contractors, by Friday morning. Both appealed and sought a stay on the verdict.
The companies are hoping to overturn the California law underlying the lower court’s decision with a ballot initiative in the upcoming election. Uber and Lyft are among the largest contributors to the $ 110 million effort to take the initiative, Proposition 22, passed to repeal the law. Lyft urged the passage of the initiative in his blog post.
There is a decision on the issue that may re-shape the so-called gig economy as drivers, distribution workers, and others who work on an essential basis for the popular app, improve working conditions, and leverage Which are in the enjoyment of many employees.
Wedbush Securities analyst Daniel Ives predicted that riding Uber and Lyft in California would create such a high level of frustration among consumers that it would help pass the initiative.
In his ruling against Uber and Lyft, San Francisco Superior Court Judge Ethan P. Shulman ordered him to change the employment classification for his California drivers, which would guarantee benefits such as overtime, sick leave, and expense reimbursement. The ruling does not affect Uber’s burgeoning briquette business, so Uber will continue to deliver food, regardless of what happens to the case.
The Shulman decision followed a new California law that worked in companies that hired gig workers. It states that companies can only classify workers as contractors if they work outside the normal scope of their business. California Attorney General Javier Becerra and several city attorneys sued Uber and Lyft, saying they were in violation of that law.
Ride-hailing companies have argued that they are technology companies, not transportation companies, so drivers are not a core part of their business.
California officials say contractors are more annoying than drivers to drivers because companies do not contribute on behalf of drivers to the state’s dwindling unemployment insurance fund.