The California First District Court of Appeals gave Uber and Lyft five more days to agree to an expedited plan for reclassifying their drivers as employees instead of independent contractors, postponing a threatened shutdown in the state of California.
They have until 5 p.m. PT on August 25 to file written statements demonstrating a compliment to comply with transition procedures.
Uber and Lyft, two rideshare behemoths headquartered in San Francisco, had previously threatened a shut down in California in response to a court order issued August 10 requiring they classify drivers as employees instead of independent contractors beginning Friday.
Though Uber had yet to provide concrete shutdown details, Lyft said it would suspend services on Thursday at 11:59 p.m. if its appeal for a stay to move back the deadline wasn’t granted.
“We are glad that the Court of Appeals recognized the important questions raised in this case, and that access to these critical services won’t be cut off while we continue to advocate for drivers’ ability to work with the freedom they want,” an Uber spokesperson said in a statement.
Uber and Lyft assert the threat of suspension isn’t a political stunt. It’s a practical necessity.
“This change would also necessitate an overhaul of the entire business model — it’s not a switch that can be flipped overnight,” Lyft wrote in a blog post.
The companies were seemingly prepared to withhold their services in California until November, when Proposition 22 will be on the statewide ballot giving voters the chance to weigh in on whether app-based companies should have to provide their drivers and delivery-persons with basic labor protections required by law.
California’s Attorney General Xavier Becerra and the city attorneys in San Francisco, San Diego and Los Angeles filed a lawsuit in May accusing Uber and Lyft of shirking AB5, the statewide labor law that requires app-based companies to classify their workers as employees and provide basic protections such as fair wages, paid leave, and unemployment and health insurance.
It went into effect in January, but the two companies have failed to make the change.
Opponents of Proposition 22 say app-based platforms have had plenty of time to figure out ways to shift their business model, as AB5 was passed last year.
Costs for the wages and benefits required by California labor law could raise labor costs to the companies by as much as 30%, by some estimates. The two have long said these prices will be passed on to the consumer, who will also see reduced service due to fewer drivers.
Advocates in favor of AB5 if a company is unable to operate without providing basic labor protections, that shows they are using exploitative practices.
“Uber and Lyft’s heinous threats to kill driver jobs and leave California are nothing short of extortion,” Gig Workers Rising, a coalition of app-based workers in favor of AB5, said in a statement. “People need to know that nothing Uber does is about protecting drivers or riders – it’s only about protecting their bottom line.”
Uber and Lyft say AB5 takes away driver flexibility and limits how many people can drive on the platforms.
“Earlier this week the State of California obtained a court order that would take away your ability to earn with Lyft when and where you want — and it could prevent you from driving with Lyft altogether,” the company sent in a letter to its drivers earlier this week.
They and other app-based companies are steering a $110 million campaign to compel voters and their drivers to vote in support of Proposition 22, which would permit the corporations to continue classifying drivers as independent contractors but entitle them to some benefits like a health stipend and elevated earnings minimums.
Opponents like Gig Workers Rising say Proposition 22 isn’t an alternative. Rather, if passed, it’d be a bona fide exemption for these companies to a broad-reaching statewide law and an admission that power begets exceptionalism.
“The companies are using this shutdown to force their way and scare Californians into voting yes on Prop. 22, their corrupt & undemocratic ballot measure,” the advocacy group said in a statement.
The threat of a statewide shutdown created fissures between city leaders.
Becerra, at the helm of the team of city attorneys initiating the legal action against Uber and Lyft, wrote in a brief filed Wednesday that the two companies are trying to “forestall any consequence from their collective years of unlawful behavior,” according to reporting from the San Francisco Chronicle.
Meanwhile, the mayors of San Jose and San Diego called on the courts to grant a stay, thereby allowing more time for stakeholders to negotiate a resolution to allow the services to continue operating and mitigate the impact on an estimated one million gig workers in California who earn rideshare income.
“A stay could provide an opportunity for parties to come together with state leaders to negotiate a resolution to this complex issue and avoid irreparable harm upon hundreds of thousands of residents whose lives and livelihoods depend on these services,” they wrote in a joint statement.