Uber, Lyft avoid Calif. brake
Uber and Lyft saw their stocks soar after an eleventh-hour stay allowed the companies to avoid a service shutdown in California.
The ride-hail giants were set to suspend service in their largest US market Thursday at 11:59 p.m. after a judge ruled they had violated the state’s Assembly Bill 5, which requires companies to classify their workers as employees if they control how workers do their jobs.
But an appeals court has allowed Uber and Lyft to continue treating their drivers as independent contractors — and thus to continue operating in California — while their appeal works its way through the court.
The last-minute reprieve sent Uber shares up 6.8 percent Thursday afternoon, while Lyft turned a 6.5 percent drop into a 5.4 percent gain.
Lyft earlier on Thursday had told drivers that it planned to shutter service at 11:59 p.m., while Uber CEO Dara Khosrowshahi had previously threatened to suspend service in the Golden State.
Uber and Lyft have argued that they are not employers, but instead tech providers that simply connect drivers with riders.
Uber and Lyft prefer using that classification for drivers because treating them as employees would require benefits such as minimum wage, paid sick and family leave, unemployment insurance and worker’s compensation insurance.
The shutdown would have been a major blow to two companies that still haven’t proven they can make money, even as they have held down their expenses by treating drivers as independent contractors.
The companies are hoping to overturn the California law underlying the lower-court decision with a ballot initiative in the upcoming election. Uber and Lyft are among the biggest contributors to a $110 million effort to get the initiative, Proposition 22, passed to rescind the law.
At issue is a decision that could reshape the so-called gig economy as drivers, delivery workers and others who work for popular apps on an as-needed basis seek improved working conditions and benefits that many in the workforce enjoy.