Lyft and Uber Get Court Order to Avoid California Shutdown—for Now

 

After day full of reversals that gave us whiplash, Uber and Lyft will not shut down their ridesharing services.

UPDATE (5:00 p.m ET, August 20): In a rapid turn of events, a court in California has issued an emergency stay, allowing Uber and Lyft to avoid complying with AB-5 until August 25. Uber and Lyft will have more time to file a plan with the court outlining how they will comply with a previous court order to reclassify their workers as employees, unless Proposition 22 passes. This means that Lyft's suspension of operations, due to go into effect at midnight tonight as per the previous update, has itself been suspended.

UPDATE (1:00 p.m. ET, August 20): Lyft has announced via a blog it is suspending operations in California starting at 12:00 a.m. PT, August 21, claiming changes required by AB-5 would reduce ride availability, cause a reduction in work for its drivers, and increase the cost of rides for users. Lyft is also encouraging voters to approve Proposition 22, a measure supported by Uber and Lyft that would codify their drivers as independent contractors and provide some benefits.

There's a showdown brewing in California over ridesharing services, primarily Uber and Lyft, which have started informing users of their apps that service may be suspended this week in that state. This has nothing to do with the ongoing health crisis and is the latest escalation in the battle between the state and ridesharing companies over whether the latter's drivers are employees or not.

California recently passed a bill known as AB-5, which set new criteria to separate "independent contractors" from regular employees. The test set forth in AB-5 has a few parts, but basically it says that if a worker's duties are controlled by the company, and if that worker's duties are part of the company's regular course of business, then that worker is an employee and not an independent contractor. That would require Uber and Lyft drivers to get the sort of benefits that real employees are entitled to, such as overtime pay and sick leave.

Uber and Lyft feel differently, since their bottom line will be seriously impacted if they have to extend these expensive benefits to drivers. They have fought AB-5 hard, spending millions of dollars on a voter proposition that would nullify the effects of AB-5.

Whether shutting down their services is a business necessity or a strong-arm tactic to achieve their goals is up for debate. What's not is that drivers, and riders, may be severely impacted by company shutdowns, even in the middle of a pandemic. At the time of this writing, these messages are only warnings about a potential shutdown. This is a fluid situation, and will be updated if necessary.