An appeals court in California on Thursday has handed Uber and Lyft an emergency stay which allows them to continue working in the state without classifying drivers as employees for now.
According to a prior ruling, this Friday was the deadline given to both companies to either start treating drivers as employees or shut down operations in the state.
Before the ruling on Thursday, Lyft had announced that it was shutting down operations in the state because it could not immediately meet the condition of classifying drivers as employees.
A company post read, “At 11:59PM PT today our rideshare operations in California will be suspended. This is not something we wanted to do, as we know millions of Californians depend on Lyft for daily, essential trips.”
Uber’s CEO, Dara Khosrowshahi, however, said on Wednesday in a Vox media podcast that the company is working on a way to continue working in the state, but switching its business model would take a lot more time.
“You can’t flip that stuff overnight. It’ll take time, and we will figure out a way to be in California. We want to be in California. But if the court case comes in, then we’ll have to shut down, and we’ve got the best engineers in the world figuring out how we can rebuild this thing.”
“If we do have to go to employment model, what’s going to happen is that we will then have to underwrite driver productivity. There will be far fewer drivers employed, so my guess is 70-80% of users who use Uber for flexibility, they drove 5 to 10 hours, etc., they will not be able to earn. The prices are going to go up. They’re going to go up less in city centres. So I think SF (San Francisco) prices will go up by 20%. Smaller cities prices will go way up.”
What the court’s ruling means
Uber and Lyft will both be able to continue their ride-sharing business in California without paying drivers employee benefits including minimum wage, overtime, sick pay and unemployment insurance. Instead, the appeals court will continue to examine the case and come to a ruling on whether the companies should classify the drivers as employees, or not.
If the court rules against Uber and Lyft, the companies will have to either shut down or alter their models to reclassify the drivers from their current status as independent contractors.
If the ruling is in the companies favour, then they will continue operations and await the decision of the Californian voters in a ballot measure coming up in November. The measure is funded majorly by Lyft, Uber, and DoorDash and seeks to pass Proposition 22.
Known as the App-Based Drivers as Contractors and Labor Policies Initiative (2020), Prop 22 seeks to exempt app‑based transportation and delivery companies from providing employee benefits to certain drivers.
If Prop 22 is passed, the companies will be able to keep classifying gig workers as independent contractors. The drivers and delivery workers for these companies will be exempt from California’s new law that classifies them as W-2 employees.
Improvements will also be made to the working terms and conditions of the independent contractors if the Prop 22 stands. It will guarantee that the workers earn at least 120% of the minimum wage while working and they will receive 30 cents per mile for expenses.
The measure will ensure they receive a healthcare stipend, occupational accident insurance for on-the-job injuries, protection against discrimination and sexual harassment and automobile accident and liability insurance.
Whether Prop 22 stands or Uber and Lyft will have to reclassify drivers will be decided in November by the Californians who vote.
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