BERKELEY: An appeals court has allowed ride-hailing giants Uber and Lyft to continue treating their drivers as independent contractors in California while an appeal works its way through the court.
Both companies had threatened to shut down if a ruling went into effect on Friday morning that would have forced 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 Thursday blog post that it planned to discontinue providing rides in California just before midnight tonight, unless a court grants a stay in a pending case. Uber CEO Dara Khosrowshahi 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 cannot afford to hire 50,000 drivers as employees quickly enough to comply.
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 who don’t receive the same benefits as their full-time employees.
California represents a substantial chunk of both companies businesses. It accounted for 9pc of Uber’s worldwide rides before the pandemic caused people to avoid travelling.
The state is even more important to Lyft, which doesn’t operate outside of the US besides Canada. California accounted for 21pc of Lyft’s rides before the pandemic, but that figure dropped to 16pc during the April-June period as more people stayed at home and there were few places to go.
The unavailability of the two ride-hailing services also would have delivered another blow to the California economy by taking away the paychecks of Uber and Lyft drivers while also making it more difficult for people without cars to get around. That’s why the mayors of San Diego and San Jose, California two of the three largest cities in the state joined forces this week urging the appeals court to block the law from going into effect.
