Lyft said it would shut down operations in California if it were forced to classify drivers as employees, company executives said in a earnings call with investors on Wednesday. Lyft joins Uber in threatening to pull off one of its key U.S. brands over the question of drivers’ employment status.
At stake is the classification of drivers with driving as independent contractors, who Uber and Lyft say most drivers prefer because of the flexibility and ability to set their own hours. But unions and elected officials doubt this of their traditional benefits such as health insurance and workers’ compensation. Earlier this week, Uber and Lyft were ordered by a California district court judge to classify their drivers as employees. Both companies said they would appeal the ruling, which was up for 10 days.
But if their profession fails, Lyft could join Uber in closing down a store in California, said company president John Zimmer. “If our efforts here are not successful, it would force us to stop operations in California,” Zimmer said in a call announcing second-quarter 2020 revenue. “Fortunately, voters in California can make their voices heard by voting yes to Prop 22 in November.”
Uber and Lyft, along with DoorDash, are funding a voting measure, Proposition 22, that AB5 would pass on by classifying ride-hail drivers and other gig-economy workers as self-employed contractors. The voting measure is the Plan B of the companies if their efforts to reverse the legal challenges of the state fail.
If drivers were classified as employees, Uber and Lyft would be responsible for paying their minimum wages, overtime pay, paid rest periods, and compensation for the cost of driving for the companies, including personal mileage. But as independent contractors, drivers do not receive any of these benefits.
Lyft’s revenue report was grim, as the COVID-19 shutdown continued the demand for app-based ride-healing. The company reported $ 339 million in revenue in the second quarter, a decrease of 61 percent compared to the same period last year. Lyft’s active ridership also fell 60 percent this quarter to 8.7 million active users compared to 21.8 million last year.
Lyft lost less money this year compared to last year because it carried fewer trips. Net loss for Lyft was $ 437.1 million in the second quarter, compared to $ 644.2 million in the same period last year.
The company makes money on ride-hike, bike and scooter trips, and its new car rental business. Unlike Uber, Lyft does not have a full-fledged food and grocery business to fall back on when its core business declines.
