Appeals court gives reprieve to Uber, Lyft in California
B(5.(/(<, Calif. AP ² An appeals court has allowed ride-hailing giants 8ber and /yft to continue treating their drivers as independent contractors in California in a decision that will give the two companies a few more months to protect their business models in a key market.
The stay pauses a lower-court ruling that was scheduled to take effect at midnight on )riday and would have forced 8ber and /yft to treat all their drivers as employees. The companies said that such a change in status would be impossible to accomplish overnight and would have saddled them with a financial burden difficult for them to shoulder while they are still struggling to turn a profit.
/yft told riders and drivers in a Thursday blog post that it planned to discontinue providing rides in California just before midnight without a stay. 8ber C(2 'ara .hosrowshahi had repeatedly said its service would have no choice but to stop providing rides in California if the state’s law goes into effect because the company can’t just flip a switch and quickly hire about 50,000 drivers as employees.
A California shutdown would have dealt a staggering blow to 8ber and /yft at a time when both are still sustaining huge losses while the pandemic has scared off millions of riders who aren’t traveling as much or are worried about possible e[posure to the novel coronavirus.
The state represents a big part of 8ber and /yft’s businesses. ,t accounted for 9 of 8ber’s worldwide rides and food delivery service before the pandemic caused people to avoid traveling. California is even more important to /yft, which doesn’t operate outside of the 8.S. besides Canada. ,t accounted for 21 of /yft’s rides before the pandemic, but that figure dropped to 16 during the April--une period as more people stayed at home and there were few places to go.
8ber said the appeals court reprieve will ensure its “critical services won’t be cut off while we continue to advocate for drivers’ ability to work with the freedom they want.”
/yft applauded the stay in a statement while vowing “to continue fighting for independence plus benefits for drivers.” ,nvestors cheered the news too as 8ber’s stock gained nearly 7 to close at 31.41 and /yft’s stock gained nearly 6 to close at 29.76.
The stay delivered a temporary setback for California Attorney *eneral ;avier Becerra after winning a lower-court ruling earlier this month that would have enforced new employment standards passed by state lawmakers last year.
“We’re confident in the facts of our case and we look forward to continuing our fight to defend the rights of workers across the state,” Becerra’s office said in a statement.
,t will be business as usual for 8ber and /yft in California, at least for the ne[t few months. But things could change during the fall, especially if they can’t persuade California voters to approve a ballot initiative in 1ovember that will let the app-based companies continue to treat drivers as independent contractors, thus making them e[empt from state laws mandating overtime, sick leave and e[pense reimbursement. But the law would provide drivers with “alternative benefits,” including a minimum wage and subsidies for health insurance.
8ber, /yft and 'oor'ash have pledged a collective
90 million to campaign for the ballot measure this fall in addition to Postmates and ,nstacart’s contributions of 10 million each. 2pposition to the initiative is funded by organi]ed labor, making it one of the more e[pensive and high-profile initiatives on the ballot this year.
Before votes weigh in on the initiative, the appeals court will hear oral arguments in an 2ct. 13 hearing.
But a ruling is unlikely until after the 1ov. 3 election.
The ride-hailing companies have argued that they’re technology companies, not transportation companies, so drivers are not a core part of their business.
California officials say treating drivers as contractors harms more than just drivers, since the companies don’t contribute to the state’s dwindling unemployment insurance fund on the drivers’ behalf.
The threat of a California shutdown rankled drivers.
“,’m outraged that they would just abandon their drivers, abandon their passengers, just abandon their obligations and duty as a business that was founded in California,” said -erome *age, 28, who drives fulltime for /yft. “We can end all this when we vote no on Prop. 22 in 1ovember.”