Uber may shut down its operations in California, one of the largest markets in the U.S., if it is forced to classify drivers as employees, the company’s CEO Dara Khosrowshahi told MSNBC on Wednesday.
Earlier this week, Uber and Lyft were ordered by a California district court judge to classify their drivers as employees. 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. Both companies said they would appeal the ruling, which was up for 10 days.
But if their profession fails, Uber store in California may have to close, Khosrowshahi said. “If the court does not reconsider, then in California it is hard to believe that we can quickly switch our model to full employment,” he told MSNBC.
In May, Attorney General Xavier Becerra of California, along with city attorneys for Los Angeles, San Francisco, and San Diego, sued Uber and Lyft, in a lawsuit alleging that their drivers were classified as independent contractors when they had to be employees of the AB5. law of the state that came into force January 1st.
Becerra later filed a motion for a preliminary injunction that would force companies to ride with classifying drivers directly as employees. AB5, which was signed into law last September, defies the so-called ‘ABC test’ to determine if someone is a contractor or an employee.
In his ruling in favor of Becerra’s advancement, Superior Judge Ethan Schulman said Uber and Lyft’s arguments – that the work of drivers falls outside the normal course of business – “fly in the face of economic reality and common sense. “
Spokesmen for Uber and Lyft did not immediately respond to requests for comment.
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.
The call for lawsuits and lawsuits in California comes ahead of the November election, when state voters will decide on an Uber and Lyft-backed voting measure that AB5 would pass by classifying ride-hail drivers and other gig economics workers as independent contractors. The voting measure is seen as the backstop of Uber and Lyft when the state determines that it abbots AB5.
