After announcing that they would probably cease operations in California, an appellate court granted the ridesharing app companies Uber and Lyft a temporary reprieve that will delay the order that would have forced them to reclassify their drivers as employees instead of independent contractors.
Just last week, a California court ordered all gig economy companies to reclassify their drivers in the state as employees rather than independent contractors in 10 days. This came after several companies including Lyft and Uber refused to follow through with the passage of AB5, which went into effect at the start of the year, requiring classifying drivers as employees.
Earlier in August, both Uber and Lyft argued in court that they should be able to continue classifying their drivers as independent contractors, but a judge disagreed, granting a preliminary injunction to force both companies to reclassify their drivers as employees.
In response, Lyft had said earlier that it would suspend service in the state by the end of the day if an appeals court didn’t grant its request for a delay. Uber, on the other hand, also said it would suspend service by midnight on Aug. 20 if not granted a similar delay on the order. And while this reprieve buys the companies a bit more time, they still have a deadline to meet and make the changes they were ordered to do.
In a statement, Lyft spokesperson Julie Wood said: “While we won’t have to suspend operations tonight, we do need to continue fighting for independence plus benefits for drivers.” Also, an Uber spokesperson told TechCrunch: “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.”
Lyft and Uber, together with other gig-economy app companies like DoorDash, Instacart, and Postmates, have been funding a ballot initiative, Proposition 22, that would allow them to continue treating workers as contractors while offering them some wage and benefit guarantees.
As previously mentioned, the order laid out new deadlines that the companies must meet. By September 4, 2020, the CEOs of Lyft and Uber must submit sworn statements laying out their “implementation plans” for complying with the law within 30 days in case the court upholds the earlier injunction order and if the ballot initiative doesn’t pass in the upcoming election. Oral arguments are scheduled for Oct. 13.
On a Vox Media podcast, Uber CEO Dara Khosrowshahi said that the company can’t hire all 50,000 of its drivers overnight: “It’ll take time, and we will figure out a way to be in California. We want to be in California… If we do have to go to employment model, what’s going to happen is that we will then have to underwrite driver productivity.” He also said the number of drivers would go down and the price for rides would go up.
Uber and Lyft have both built up massive fleets of drivers by classifying them as independent contractors and not employees. The reclassification of their workers represents a major shift in how both businesses operate. As independent contractors, their drivers are not entitled to most labor guarantees, such as state minimum wage, paid sick leave, overtime pay, workers’ compensation, and unemployment insurance.
As aforementioned, come November, Californians will vote on Prop 22. This measure aims to keep gig workers classified as independent contractors, and if passed would make drivers and delivery workers for said companies exempt from a new state law that classifies them as W-2 employees.