This week, reports from both Uber and rival Lyft have shared that the ride-sharing companies may be forced to shut down their operations in California following a preliminary injunction granted by a California judge on Monday, CNBC reports.
Last year, California lawmakers passed a landmark bill — known as Assembly Bill 5 (AB5) — that threatened to reshape the structure of Uber and Lyft as it requires gig economy workers to be reclassified as employees instead of contractors, according to CNBC.
Uber and Lyft were very vocal about protesting against this bill as they argue their workers enjoy the flexibility of creating their own schedules. They’ve since sought out to appeal the bill with only about one week remaining before they’ll be forced to comply.
According to The Verge, both companies have stated they cannot afford to classify their drivers as full-time employees versus independent contractors, so they would have no choice but to close up shop in California.
“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,” Uber CEO Dara Khosrowshahi said.
The president of Lyft — John Zimmer — shared the same sentiments.
“If our efforts here are not successful it would force us to suspend operations in California. Fortunately, California voters can make their voices heard by voting yes on Prop 22 in November,” Zimmer said.
According to Digital Trends, Proposition 22 is a ballot initiative that allows voters to decide whether or not contract workers should be classified as employees or independent workers.
In an earnings call with Digital Trends, Zimmer revealed that the majority of [Lyft] drivers wish to remain independent contractors.
Khosrowshahi also shared that pausing service in California would leave thousands of drivers without their normal income earnings from Uber, in addition to what they’ve already lost due to the pandemic.
California Attorney General Xavier Becerra — one of four lawyers who have sued Uber and Lyft this year — told CNBC that he was unbothered by the fact that Uber and Lyft could potentially lose operations in the state.
“Any business model that relies on shortchanging workers in order to make it probably shouldn’t be anywhere, whether California or otherwise,” he said.