Following a judge's decision to grant California's request for a preliminary injunction against ride-hailing services Uber and Lyft to make drivers employees instead of independent contractors, Uber CEO Dara Khosrowshahi says the company may temporarily halt operations in the state.
“If the court doesn’t reconsider, then in California, it’s hard to believe we’ll be able to switch our model to full-time employment quickly,” Khosrowshahi said during an interview on MSNBC.
On Monday, San Francisco Superior Court Judge Ethan Schulman granted California's injunction saying that Uber and Lyft must classify people who drive for the ride-hailing services as employees, rather than independent contractors. Both companies had ten days to appeal before the ruling goes into effect.
The lawsuit against Uber and Lyft was brought by California Attorney General Xavier Becerra and three city attorneys, including Los Angeles City Attorney Mike Feuer. The lawsuit cited the state's new law, Assembly Bill 5, that is intended to help provide benefits such as health insurance to gig-economy workers by classifying them as employees for the service. People who currently drive for Lyft and Uber are classified as 'Independent Contractors' who carry their own insurance, are only paid what they can earn while driving for the service instead of a minimum wage, and they are not reimbursed by the ride-sharing companies for expenses related to their job.
Should Uber and Lyft's appeal fail, Khosroshahi says Uber will need time to rehire all its drivers as employees. In California, that would mean the company would spend more time hiring drivers in densely populated areas, meaning suburbs and rural areas would see fewer drivers.
In response to Assembly Bill 5, Uber and Lyft are pushing Proposition 22, a ballot initiative that would classify drivers as freelancers who would be entitled to some benefits and earnings.
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