Uber and Lyft cancel California shutdown after court grants reprieve

21 Aug 2020

Image: © itchaznong/Stock.adobe.com

In response to a recent ruling in California, requiring Uber and Lyft to reclassify their drivers as employees, the companies threatened temporary shutdowns in the state. Now, that may not be necessary.

Earlier this month, a California judge ordered ride-hailing businesses Uber and Lyft to reclassify their drivers as employees, while alleging that the drivers are misclassified under the state’s new labour law, AB-5.

This decision would mean that drivers for the ride-hailing services would be entitled to minimum wage, benefits, health insurance, social security, paid sick days and overtime.

In response to the judge’s ruling, Uber and Lyft planned to suspend their operations in the state. Uber CEO Dara Khosrowshahi said that the court’s decision could result in a several-month shutdown for the company as it adjusted to changes ordered by the court.

On Thursday (20 August), an appeals court granted Uber and Lyft a temporary reprieve from the court’s decision, allowing them to continue operating while their appeal is decided upon.

Preventing a shutdown

The decision was made by the appeals court mere hours before Uber and Lyft’s temporary shutdown was set to begin. Now, oral arguments in the case will be held in mid-October.

A spokesperson for Uber said: “We are glad that the court of appeal recognised the important questions raised in this case, and that access to these critical services won’t be cut off while we continue to advocate for drivers’ ability to work with the freedom they want.”

According to the New York Times (NYT), the court has ordered that Uber and Lyft submit plans for hiring employees by early September, to prepare for a situation in which the court does not decide in their favour.

Speaking to the NYT, John Cote, spokesperson for the San Francisco attorney, said: “These companies may have bought themselves a little more time, but the price is that they have to demonstrate – under oath – that they have an implementation plan that complies with the law. The court of appeal is calling Uber and Lyft’s bluff.”

Considering a franchise model

One of the measures that Uber and Lyft have been considering to create further legal distance from themselves and drivers, is the implementation of a franchise model.

By doing so, the ride-hailing businesses would franchise their technology to smaller organisations operating vehicle fleets so that the smaller businesses will be responsible for the drivers.

A spokesperson for Uber said that the concept was “exploratory” and that the company is “not sure whether a fleet model would ultimately be viable in California”.

Lyft said that it favoured a model where drivers “remain independent and can work whenever they want while also receiving additional healthcare benefits and an earnings guarantee”.

Lyft also published a blog post urging people in California to vote in favour of the companies at a ballot measure called Proposition 22 that aims to keep drivers as independent contractors. To date, Uber, Lyft, DoorDash, Postmates and Instacart have reportedly spent $110m on the ballot measure, which is up for vote in November.

Kelly Earley was a journalist with Silicon Republic