Uber would likely shut down temporarily for several months if a court did not reverse a recent ruling requiring it to classify its drivers as full-time employees, CEO Dara Khosrowshahi said in an interview with Stephanie Ruhle on Wednesday on MSNBC.
“If the court does not reconsider, then in California it is hard to believe that we can quickly switch our model to full employment,” Khosrowshahi said.
Uber and rival Lyft both have about a week left to appeal a preliminary injunction issued Monday by a California judge that will prohibit companies from continuing to classify their drivers as self-employed workers. Following the order, Uber and Lyft will be required to provide benefits and unemployment insurance for workers.
The California Attorney General and three city attorneys brought the case against the companies under the state’s new law, Assembly Bill 5, which aims to provide benefits to core workers in a company’s business by to classify them as employees. In its decision on granting the preliminary injunction, the judge rejected the idea that drivers should be considered outside the scope of business companies, calling the logic “a classic example of round reasoning.”
Uber and Lyft both said they will appeal the ruling within 10 days before it goes into effect.
Rather than classifying drivers as employees, Khosrowshahi has advocated for what he calls a ‘third way’, which would preserve drivers’ independence while allowing companies to provide some protection without risking being considered full-time employers. In a New York Times preview of the court ruling, Khosrowshahi said that gigantic companies like Uber could pay into a fund that workers can pay for paid time on health care benefits based on the number of hours they work.
Khosrowshahi said on Wednesday that his Plan B as Uber could not win on appeal would be to temporarily halt service in California. While he said Uber would later resume service in the state, it would likely be more centralized in cities, which could mean limited availability in less concentrated areas such as suburbs.
If the appeal does not work for Uber, it will bank voters to determine its fate. Khosrowshahi said if that were the case, the service would likely shut down in California until November, when voters in the state decide on Proposition 22, which would exempt drivers for app-based transportation and delivery companies from workers. Uber has claimed that its drivers prefer to work as self-employed contractors, although California AG Xavier Becerra dismissed that advantage as a “false argument.”
Khosrowshahi insisted that pausing services in the state would leave thousands of drivers without the income they would typically earn from Uber. However, ridership in the pandemic has gone downhill in any case, which the judge said the order came at what is perhaps “the worst time” for Uber and Lyft to adjust their business models.
Becerra said in an interview with CNBC on Tuesday that he was unconcerned about the potential for Uber to leave the state as a result of the order.
“Any business model that relies on workers with short shifts to make it probable would probably not have to be somewhere, either California or otherwise,” he said.
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WATCH: California Attorney General on Court Requires Uber, Lyft to Classify Drivers as Employees
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