Uber and Lyft could close this week in California. What you should know

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A splash of notifications lit up the phones of Lyft and Uber users in California earlier this week.“Save on carpooling in California!” one from Lyft read.

“Service Update: California Rideshare May Be Paused,” Uber wrote.

The flurry of warnings is the result of California’s efforts to bring businesses in the on-demand economy into compliance with state labor law – a clash that could take hold this week. On Friday, the millions of Californians who use Uber and Lyft to flag rides may be forced to resort to other modes of transportation. If and when companies resume service here, it could take a drastically different form.

In early August, a San Francisco Superior Court judge ordered companies to classify their drivers as employees rather than independent contractors, providing a 10-day window for companies to appeal the ruling. With that window closing Thursday night, Uber and Lyft are threatening to shut down their services at midnight, saying they can’t transition their business models fast enough.

Judge Ethan Schulman dismissed the two companies’ initial appeals last week. Uber and Lyft filed immediate suspension requests with a California appeals court, which they expected to rule on as early as Wednesday. The court could grant the appeal and stay Schulman’s injunction for a period of time, or decline to make a ruling, which would mean that the Thursday expiration date would remain in effect.

The legal battle began with a lawsuit brought by the Atty state. General Xavier Becerra, in May, alleged that by mistakenly classifying drivers as independent contractors, companies had deprived them of protections and benefits for workers such as minimum wages and unemployment insurance.

The move was part of the state’s efforts to force companies to comply with the Assembly’s Labor Law Bill 5, which set higher standards for companies to treat workers. as independent contractors rather than as employees. Essentially designed to provide benefits to performing workers, the law went into effect on January 1, but companies such as Uber, Lyft, Doordash and Postmates have vehemently resisted compliance.

Uber and Lyft have said any shutdown could continue into the November election, when California voters decide on a voting initiative that would largely nullify AB 5 by creating a third category of work for drivers. Businesses spent millions on the initiative and an advertising campaign to support it.

Critics said companies have had a long time figuring out how to transition their operations, given the AB 5 was approved about a year ago, and are using the threat of shutting down their service in California to capitalize on a favorable outcome for prop 22, capitalizing on frightening tactics to persuade voters to support the initiative.

“Uber and Lyft are threatening to cut jobs in California. I think companies are trying to force us to make a decision to give them what they want and that is Prop. 22, which is to keep denying us basic labor protections and the benefits we have earned. Said Cherri Murphy, a truck driver. for about three years. An Oakland resident, Murphy is also an organizer with the Gig Workers United and Rideshare Drivers United task forces, who have fought for protections for drivers.

Uber pushed back on this assessment, saying many drivers prefer to remain independent contractors. “The vast majority of drivers want to work independently and we have already made significant changes to our app to ensure this remains the case under California law. When over 3 million Californians are out of work, our elected leaders should focus on creating work, not trying to shut down an entire industry during an economic crisis, ”Uber spokesman Davis White said. in a press release.

Lyft spokesman CJ Macklin declined to comment on the case, but pointed to an excerpt from Lyft’s earnings call last week. Co-founder John Zimmer said during the appeal that if efforts to appeal the injunction fail, it would force the company to suspend operations in California.

“Fortunately, California voters can make their voices heard by voting yes to Prop 22 in November,” Zimmer said, and if passed, the measure “would protect the independence and flexibility of drivers, while also offering new historical advantages and protections ”.

Uber and Lyft have been tight-lipped on what the future will look like if or when they are forced to comply with AB 5.

Companies are quietly exploring the licensing of their brands to independent franchises controlling vehicle fleets in the state. Such a model would place more layers between companies and drivers, giving them more leeway to avoid claiming drivers as employees. Uber already operates on this model in Germany and Spain.

When asked about these talks, which were first reported by The New York Times, Lyft deviated. “We looked at alternative models, and the one that would work best for drivers is what we support in measuring the ballot – they remain independent and can work when they want while receiving additional health benefits and guaranteed income ”. spokeswoman Julie Woods said in a statement.

Labor attorney Shannon Liss-Riordan, who has argued against Uber on behalf of drivers over the years, said nothing about employee status would prevent companies from offering their employees work flexibility.

“Uber’s strategy has always been to waive legal obligations,” said Liss-Riordan. “It’s hard for me to understand why a business has to close to comply with the law. ”

Uber does not plan to halt operations of its Uber Eats delivery service because Becerra’s lawsuit did not specify the drivers for that platform, the company said. Uber’s delivery orders more than doubled in the second quarter, with Americans relying on deliveries to avoid exposure to the coronavirus during the pandemic. At the same time, carpooling trips were hit hard, down 75% from last year.

The San Francisco district attorney sued the DoorDash food delivery app in June, alleging misclassification of workers. Uber said it anticipates a similar fight on this front.

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