Last-minute California reprieve for Uber and Lyft stops shut down of services in the state

A California judge has extended the stay of Uber and Lyft in the region on a temporary basis, thwarting the threatened last-minute shutdown of the platforms.

The decision comes following an ongoing legal battle over drivers' employment classification.

The two ride-hailing giants had been awaiting a court decision which would enforce a new employment law in the state called ‘AB5’. The new AB5 law is a piece of legislation signed into law by Governor Gavin Newsom in September 2019, and came into effect on 1 January. It required companies that hire independent contractors to reclassify them as employees, with a few exceptions.

However the decision to enforce the new law, which was expected to start last night, has now been pushed back to allow for an appeal.

An Uber spokesperson said via their Blog on Wednesday: “We may have to temporarily suspend ridesharing in California starting this week.

“The California Attorney General obtained a court order that requires rideshare companies to hire drivers as employees—immediately—or else shut down.

“We’ve appealed this decision, but if we are not successful in our appeal, we will need to temporarily shut down by Thursday night. 

“We know that riders rely on Uber to get around, and drivers rely on the Uber app to earn income. We wanted to let you know that this is a possibility, so you can plan accordingly.

“We remain committed to helping drivers get access to new benefits and protections without compromising the flexibility they have today via Proposition 22, which is on the ballot this November.“

There was also support from two state city Mayors. San Diego Mayor Faulconer and San Jose Mayor Sam Liccardo released a statement on Wednesday supporting an extension to allow for ride-hailing companies to find a national model that would enable gig-workers to continue.

In the statement it said: “As the Republican and Democratic mayors of two of California’s three largest cities, we have serious concerns that this Friday, most of California’s nearly one million gig workers will lose their rideshare income when Uber and Lyft shut down their operations in the Golden State.

“A court’s decision to not exempt ridesharing companies from the dictates of Assembly Bill 5, which forces many businesses to treat independent workers as employees, has caused Uber and Lyft to prepare to exit their largest domestic market. This sudden disappearance of jobs and transportation options will only deepen the economic pain felt in our communities during this historic pandemic and recession. 

“Most of us appreciate the critical value rideshare services provide, but this is about more than the mere convenience that these businesses bring to our daily routines. Uber and Lyft deliver food to homebound seniors, transport patients to and from medical care, support the nation’s largest bike-share networks, and serve as a lifeline for essential workers who need transportation.

“We ask that the Court of Appeal grant Uber and Lyft’s writ petitions and stay the injunction that would require these companies to restructure their entire operations virtually overnight.  A stay could provide an opportunity for parties to come together with state leaders to negotiate a resolution to this complex issue and avoid irreparable harm upon hundreds of thousands of residents whose lives and livelihoods daily depend on these services.

“California can use this moment to create a national model for enabling gig workers to thrive in the innovation economy. The vast majority of drivers want to stay independent workers and are looking for solutions that protect their independence while also providing additional benefit. Creating a portable benefit fund for independent contractors, and requiring companies to pay into it, would provide immediate gains for California gig workers. The fund would help independent workers save for the future, especially with an equitable benefit accrual structure that ensures an hour of benefits for every hour worked. This new stream of income would stay with independent workers throughout their lives, allowing them to invest in health insurance, retirement or any other benefit.  

“Being forced into a situation where shutting down service is the only viable option hurts everyone at a moment when we need to pull together to help more Californians make ends meet. We call on all parties to turn this political standoff into a foundation for productive conversation about new ways to preserve a valued service and fairly compensate independent workers. California can choose to continue to implement solutions that lead the innovation economy, or to be led by others. The livelihoods of nearly one million residents depends on California choosing to lead.”

The extension now allows for a potential way out for the ride-sharing companies later this year.

In November, a ballot will be put to vote at the same time as the US presidential election, which would seek to offer ride-hailing firms an exemption from AB5. The ballot has been called ‘Proposition 22’.

A Lyft spokesperson said: “Your voice can help. A ballot measure this November, Prop 22, proposes the necessary changes to give drivers benefits and flexibility, while maintaining the rideshare model that helps you get where you need to go.”

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