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Uber and Lyft say they may shut down in California if forced to classify drivers as employees

Uber CEO Dara Khosrowshahi, proven right here in 2019, mentioned Wednesday that Uber may have to shut down its app in California for at the least a few months if it loses an attraction and has to classify its drivers as employees.

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Uber Technologies Inc. and Lyft Inc. warned Wednesday of plans to doubtlessly shut down their operations in California if they are forced to acknowledge drivers as employees in the state.

The two corporations are interesting a choose’s ruling requiring drivers to be categorized as employees as a substitute of contractors. The choose gave Uber and Lyft 10 days to file an attraction earlier than his order goes into impact.

Uber UBER CEO Dara Khosrowshahi warned Wednesday in an interview on MSNBC that the corporate’s ride-hailing service might shut down in California till November as a outcome. Khosrowshahi mentioned that it could be “unfortunate,” however what the injunction granted Monday would require could be powerful for Uber to pull off rapidly.

“If the court doesn’t reconsider, then in California, it’s hard to believe we’ll be able to switch our model to full-time employment quickly,” he mentioned. “We can’t go out and hire tens of thousands of people directly overnight.”

After saying earnings Wednesday afternoon, Lyft President John Zimmer mentioned in a convention name that dropping an attraction would “force us to suspend operations in California.”

Key to the attraction of this week’s ruling is whether or not the injunction granted by the choose is obligatory, as the corporate contends, or prohibitory. If it’s the previous, an attraction would mechanically set off a keep; if it’s the latter, they can proceed its attraction however would have to adjust to the injunction order in the meantime.

Uber’s CEO identified that the corporate doesn’t suppose it’s probably that it’ll lose the attraction. If it did, he mentioned Uber would have to go darkish till November. That’s when California voters are set to think about Proposition 22, which might exempt Uber, Lyft Inc.
and different gig-economy corporations from Assembly Bill 5, a California regulation that might require them to classify their drivers and supply employees as employees however guarantees them some concessions. AB 5, handed in May 2019, is predicated on a California Supreme Court ruling made greater than two years in the past that modified the requirements for worker classification in the state.

The corporations are difficult AB 5, which went into impact originally this yr, but it surely might be a number of months earlier than the U.S. Court of Appeals for the Ninth Circuit in San Francisco takes up the attraction. Pending that, California Attorney General Xavier Becerra and town attorneys of San Francisco, Los Angeles and San Diego sought an instantaneous injunction to pressure Uber and Lyft to adjust to AB 5, which San Francisco Superior Court Judge Ethan Schulman granted Monday.

When reached for remark Wednesday, an Uber spokesman mentioned Khosrowshahi’s feedback are in line with a movement for a keep the corporate filed in court docket Tuesday, in which it mentioned {that a} shutdown “would irreparably harm Uber and all who rely on its Rides app to generate income for them and their families — particularly in the midst of a pandemic.”

Mostafa Maklad, an Uber driver in San Francisco and a Gig Worker Rising chief, on Wednesday known as Khosrowshahi’s phrases a menace “that won’t work.”

“It will be their loss because San Francisco and Los Angeles are their biggest markets,” he mentioned in an interview. A attainable shutdown “won’t be an easy transition for workers, but we will make it through together,” he added.

In an e-mail Wednesday, Khosrowshahi urged drivers to vote for Prop. 22, which Erica Mighetto, an organizer with Rideshare Drivers United, mentioned is “making an ask of drivers that will irreparably harm them.”

Uber mentioned in its submitting that “it would take millions of dollars and months of effort to restructure the Uber Rides business model,” and outlined the steps required, together with reworking the Rides app from a platform that “drivers can choose to use or turn off at their leisure” to “a taxi-like employment system” and constructing an HR system to onboard employees and observe drivers’ hours and wages.

Opinion: Uber and Lyft’s ‘day of reckoning’ is lastly right here

During the injunction listening to final week, Matthew Goldberg, deputy metropolis legal professional for the San Francisco City Attorney’s workplace, argued that Uber and Lyft have already got massive white-collar workforces and human assets departments.

“Defendants have dramatically overstated what would be required” to change their drivers to worker standing, he mentioned. “These businesses already do many of the things that lawful employers do.”

Uber shares fell 1.2% Wednesday, whereas Lyft shares declined 0.4%. Lyft shares initially moved increased in after-hours buying and selling Wednesday after the corporate reported smaller quarterly losses than anticipated, however turned to a decline through the convention name.

In a notice to shoppers Monday after the choose’s resolution, Deutsche Bank analysts mentioned they didn’t suppose a attainable short-term shutdown in California could be an enormous hit financially to Uber as a result of demand continues to be low in the state through the COVID-19 pandemic.

Still, they mentioned “it’s obviously not the company’s ideal outcome.”

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