OAKLAND, Calif. – Uber and Lyft say unless a state appeals court appeals on Thursday, they will shut down passenger services in California for at least several months if not more than a year.
The companies say it is virtually impossible for them to follow the orders of a San Francisco judge last week who said they had broken a new state law known as AB5 and declared hundreds of thousands of their drivers as contractors in place of as employees.
San Francisco County Superior Court Judge Ethan Schulman found an “overwhelming opportunity” that Uber and Lyft had outdone their drivers. He issued a preliminary injunction ordering the companies to stop the practice, which saves the companies millions of dollars a year because they do not have to pay into benefit programs, including unemployment insurance and workers’ compensation.
The mayors of San Jose and San Diego issued a statement Wednesday to ask the 1st District Court of Appeal to put the exemption on hold because a shutdown would “deepen economic pain in our communities during this historic pandemic and recession.”
Schulman had been on hold for 10 days to enforce the verdict pending appeal, which ends Thursday at 11:59 p.m. It remains unknown when or the appeal court would rule before the clock expires.
Uber did not respond to a request for comment on Wednesday afternoon. Please refuse to comment for attribution.
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Schulman’s ruling is the latest twist in a lawsuit filed three months ago by California Attorney General Xavier Becerra and city attorneys from San Francisco, Los Angeles and San Diego.
Wednesday morning, San Jose Mayor Sam Liccardo and San Diego Mayor Kevin Faulconer ended up largely on changes to AB5 that match what Uber and Lyft have already proposed.
“The vast majority of drivers want to remain independent workers and seek solutions that protect their independence while also providing additional benefits,” she wrote.
The mayors did not mention it directly, but they are referring to a proposed law that will go to California voters in November, known as Proposition 22. It would give AB5 a major exemption for Uber, Lyft and other similar companies for gig economy, including DoorDash. The three companies contributed the overwhelming majority of the funding for the largest lobby group behind Proposition 22.
Uber has previously threatened to pull out of an area to pressure politicians who do not bow to its will. In May 2017, the companies restored service in Austin, Texas, after being absent from the capital for more than a year.
The dispute focused on whether a city could impose additional requirements, such as fingerprinting and background checks, above and beyond what the state mandates. When the state legislature enacted a law that stated that municipalities could not do so, it paved the way for Uber and Lyft to return.
Since Schulman’s ruling last week, lawyers for both sides have filed sets of letters that are now before the appellate court.
Government attorneys wrote Wednesday in their submission that the companies that drive rides have had “illegal behavior” for years. In their filings, attorneys for Uber and Lyft said Schulman’s ruling requires them to “open up” their entire business model and move drivers to less flexible work schedules.
Government lawyers claim that Uber and Lyft chose to opt out of making major changes to their business model, which they said was a deliberate decision not ordered by the court.
“They can stop the illegal activities altogether, or they can choose to adjust their practices to comply with the law,” the lawyers wrote. “The fact that it can be difficult for Petitioners to adjust their business operations does not change the nature of the information that requires them to stop violating the law, nor does it allow them to unfairly take advantage of their unjustified status. quo. “
