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Rideshare Companies Uber & Lyft Will Not Shut Down In California... For Now

August 20, 2020

Uber and Lyft have avoided shutting down their rideshare services in California after an appellate court granted the companies a temporary stay delaying an order that would have forced them to reclassify their drivers as employees by Friday.

This week, San Diego Mayor Kevin Faulconer was on of several government officials to urge an appeals court to stay an injunction that would have ultimately led to a statewide shutdown of Uber and Lyft's operations starting at midnight tonight. The rideshare companies recently lost a court battle regarding California Assembly Bill 5, with a judge ruling the companies must classify their drivers as employees rather than independent contractors in order to comply with the law, which went into effect January 1, 2020. A legal decision today will give the companies more time to figure out how to comply with reclassify their drivers as employees. Both companies were bracing for a shutdown to begin on Friday, August 21. Lyft said earlier today it would suspend service in California by end of day if an appeals court did not grant the request for a delay. Uber said earlier this week it would also suspend service by midnight Thursday if not granted a delay on the order.

"We are glad that the Court of Appeals recognized 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," said Uber spokesperson Noah Edwardsen in a statement.

San Francisco-based Judge Ethan Schulman had previously ruled in favor of California Attorney General Xavier Becerra, and the city attorneys of San Diego, Los Angeles and San Francisco in their lawsuit alleging Uber and Lyft are misclassifying their drivers under AB 5, preventing them from receiving "the compensation and benefits they have earned through the dignity of their labor" such as the right to minimum wage, sick leave, unemployment insurance and workers' compensation benefits.    Schulman stayed his August 10 ruling for 10 days to allow the companies time to appeal.

"This is not something we wanted to do, as we know millions of Californians depend on Lyft for daily, essential trips," read a Thursday blog post by Lyft confirming plans for the shutdown. "For multiple years, we've been advocating for a path to offer benefits to drivers who use the Lyft platform - including a minimum earnings guarantee and a healthcare subsidy - while maintaining the flexibility and control that independent contractors enjoy. This is something drivers have told us over and over again that they want. Instead, what Sacramento politicians are pushing is an employment model that 4 out of 5 drivers don't support. This change would also necessitate an overhaul of the entire business model - it's not a switch that can be flipped overnight."  

Faulconer joined San Jose Mayor Sam Liccardo in issuing a joint statement yesterday calling for a stay on the injunction, citing economic impacts to California's gig workers, and a loss of transportation options and delivery services for critical resources like food and medical care for California residents.  

"This sudden disappearance of jobs and transportation options will only deepen the economic pain felt in our communities during this historic pandemic and recession," read the joint statement.

 The mayors said a stay could allow state leaders and the companies time to craft "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."  

Faulconer and Liccardo also proposed the creation of a portable benefit fund for independent contractors that the companies would be required to pay into.  

"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," the mayors continued. "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."

Uber and Lyft are also working to combat AB5 by sponsoring Proposition 22, a ballout initiative that, if approved by voters in November, would allow rideshare drivers to work as independent contractors.  

The appeals court warned the companies to continue preparing for the possible switch to employee drivers, saying each company must submit a sworn statement by September 4 "confirming that it has developed implementation plans." The companies must also affirm they are prepared to actually implement those plans and switch to the employee system within 30 days if they ultimately lose their appeal and a company-sponsored measure on the November ballot fails. The court scheduled oral arguments in the appeal for October 13. Lyft contends that four out of five drivers prefer working as independent contractors so they can have more flexibility.