A California appeals court on Thursday paused a lower court ruling that would have required Uber and Lyft to obey a new state law and classify drivers as employees rather than independent contractors.
The temporary stay means the companies will continue to operate while they appeal a state judge’s decision ordering them to classify drivers as employees, which would entitle those workers to benefits like a minimum wage, health insurance, overtime pay, sick leave and a right to form a union.
Lyft had announced earlier Thursday that it would suspend ride-hailing services in California at midnight rather than comply with the January law known as Assembly Bill 5. But after the appeals ruling, the company said it will continue business as usual. Uber, which also had previously threatened to shut down services in the state, confirmed to HuffPost that it would continue operations for now.
Uber and Lyft have been resisting the AB5 law since lawmakers passed it last year. The companies’ bottom lines will be dramatically affected if hundreds of thousands of drivers are reclassified as employees, entitled to new benefits.
California sued Uber and Lyft months ago for defying the law and continuing to classify drivers as contractors. Ten days ago, a state judge ruled that the companies needed to make their drivers employees — criticizing their “prolonged and brazen refusal to comply with California law.” The judge stayed the ruling for 10 days — until Thursday at midnight — to provide time for appeals.
Both companies appealed and threatened to shut down California operations.
The appeals court’s temporary stay remains in effect at least until October, when the court will hear arguments, according to TechCrunch. The companies have until early next month to outline plans for making drivers employees if they lose the appeal and voters fail to approve Prop 22 in November’s election. The ballot measure, which Uber and Lyft have poured millions into supporting, would essentially exempt the companies from the AB5 law.
Nearly 1 million drivers could be affected if Uber and Lyft at some point decide to suspend services, according to the mayors of San Jose and San Diego. Millions more passengers rely on the ride-hailing services to get around.
Gig Workers Rising, a group of ride-hailing drivers and other app-based workers who have been advocating for better work conditions, had slammed Lyft’s shutdown threat as “leaving drivers for dead in the middle of a pandemic, with no safety net.”
California Attorney General Xavier Becerra, whose office is leading the state’s lawsuit against the companies, tweeted on Thursday — before the appeals court’s stay — that “companies can both classify their workers as employees and continue fostering the innovation that we deeply value as a state.”
“For any company to suggest otherwise is a false choice,” he added.
The companies claim the new law deprives drivers of flexibility in choosing their schedules. California’s attorney general insists this is not true.
“There is no rule that prevents these drivers from continuing to have all of the flexibility they currently enjoy,” San Francisco City Attorney Dennis Herrera said in a statement earlier this month. His office is part of the suit against Uber and Lyft, along with city attorneys from San Diego and Los Angeles. “Being properly classified as an employee doesn’t change that.”
Matt Haney, a San Francisco supervisor representing the district where Uber and Lyft are based, had described the companies’ threats to stop service as “blackmailing” California voters into supporting Prop 22.
“They’re demonstrating clearly why they need better regulation,” Haney wrote. “I believe they can grow and thrive here. But they should follow the law. Period.”