Uber and Lyft don’t have to treat drivers as employees yet

By Cathy Bussewitz and Michael Leidtke | Associated Press

BERKELEY — An appeals court has allowed ride-sharing giants Uber and Lyft to continue treating their drivers as independent contractors in California while an appeal makes its way through the court.

Both companies had threatened to close if a decision took effect Friday morning that would require them to treat all their drivers as employees, a change they said would be impossible to accomplish overnight.

Lyft told riders and drivers in a blog post Thursday that it plans to stop providing rides in California just before midnight tonight unless a court grants a stay in an ongoing case. Uber CEO Dara Khosrowshahi has repeatedly said his service would have no choice but to stop offering rides in California if state law goes into effect because the company cannot not afford to hire 50,000 drivers as employees quickly enough to comply.

The shutdown would have been a blow to two businesses that have still not proven they can make money, even though they have kept their expenses under control by treating drivers as independent contractors who do not receive the same benefits as their full-time employees. .

California represents a significant portion of both companies’ operations. It accounted for 9% of Uber’s global rides before the pandemic stopped people from traveling. The state is even more important to Lyft, which does not operate outside of the United States other than Canada. California accounted for 21% of Lyft’s rides before the pandemic, but that figure fell to 16% during the April-June period as more people stayed home and there were few places to go.

The unavailability of the two ride-sharing services would also have dealt another blow to California’s economy by cutting paychecks for Uber and Lyft drivers while making it harder for people without cars to get around. That’s why the mayors of San Diego and San Jose, Calif. — two of the state’s three largest cities — joined forces this week to urge the appeals court to stop the law from going into effect. law.

“Being forced into a situation where shutting down service is the only viable option hurts everyone at a time when we need to pull together to help more Californians make ends meet,” the mayor of San Diego Faulconer, a Republican, and San Jose Mayor Sam Liccardo. , a Democrat.

Both companies had sought a stay of an Aug. 10 court ruling that ruled they must begin treating their drivers as employees, not independent contractors, by Friday morning. The two appealed and asked for a stay of the decision.

The companies hope to overturn the California law underlying the lower court’s decision with a ballot initiative in the next election. Uber and Lyft are among the biggest contributors to a $110 million effort to push through the initiative, Proposition 22, to repeal the law. Lyft urged adoption of the initiative in its blog post.

It’s a move that could reshape the so-called gig economy as drivers, delivery people and others who work for popular apps when needed seek to improve working conditions and benefits enjoyed by many members of the working population.

Wedbush Securities analyst Daniel Ives predicted the loss of Uber and Lyft rides in California would cause such high levels of consumer frustration that it would help drive adoption of the initiative.

In his ruling against Uber and Lyft, San Francisco Superior Court Judge Ethan P. Schulman ordered them to change the job classification of their California drivers, which would guarantee benefits such as overtime, sick leave and reimbursement of expenses. This decision does not affect Uber Eats’ growing business, so regardless of what happens with the case, Uber will continue to deliver food.

Schulman’s decision follows a new California law targeting companies that employ gig workers. It says companies can only classify workers as sub-contractors if they are performing work outside of their usual scope of business. California Attorney General Xavier Becerra and several city attorneys sued Uber and Lyft, claiming they violated that law.

The ride-sharing companies argued that they are technology companies, not transportation companies, so drivers are not an integral part of their business.

California officials say treating drivers like contractors hurts more than drivers, because companies aren’t contributing to the state’s dwindling unemployment insurance fund on behalf of drivers.