Uber and Lyft may halt services in California

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Uber and Lyft are on the verge of temporarily closing down their taxi services in California.

The dramatic move, which could be enacted this week, hinges on whether a state judge allows them an appeal or more time to reclassify their drivers from contractors to employees, as has been required by law since the passing of Assembly Bill 5 (AB 5) January.

On 10 August the San Francisco Superior Court granted a preliminary injunction that would require Uber and Lyft to reclassify drivers as employees because the companies had not complied with AB 5. The gig economy operators had 10 days to file an appeal before the injunction becomes effective on 20 August.

If an appeal is not allowed or no ruling is made on one, the taxi services said they would cease operations in California until they had the systems in place to employ drivers. Both companies have claimed they are not ready for the switch.

Uber and Lyft are backing Proposition 22 (a kind of referendum that can be brought about by writing a proposed law as a petition, and submitting it to the California attorney general), a ballot being held on 3 November that would give California voters a chance to decide the status of the firms’ workers.

If the proposition is passed the companies say they would improve working conditions for drivers who would retain their status as contractors. It is thought that a shutdown may inconvenience some voters enough to sway them and affect the outcome.

A shutdown would not greatly damage the companies any further financially because both are said to be losing money during the coronavirus pandemic.

However, Uber and Lyft drivers around the US have suffered financial hardship and have had to either continue working with fewer customers or rely on unemployment benefits from state systems that have struggled to keep up with backlogs and pay out full benefits.

A report conducted by the UC Berkeley Labor Center in May 2020 found Uber and Lyft would have paid $413m into California’s unemployment benefits system if drivers had been classified as employees rather than independent contractors.

California is among many US states struggling to maintain funds for unemployment insurance funds.

Uber and Lyft’s threats have not impressed employment campaigners in the US. Rebecca Smith, director of the work structures portfolio at the National Employment Law Project, said the mooted shutdown “puts the lie to any concern [Uber] claims to have about job loss and worker well-being – it is saying it will lay off tens of thousands of workers unless judges and voters give it what it wants”.

The companies have also been accused of trying to buy their way out of legal rulings: their campaigns to overturn AB 5 in support of Proposition 22 are said to have cost each firm at least $30m.

Many of the firms’ drivers reject Uber and Lyft’s claims that they are independent contractors, citing the lack of control drivers over per-mile pay rates and the practice of charging passengers more when demand for rides is high, without passing any of the proceeds to drivers.