Uber, Lyft California Likely to Shutdown if Forced to Classify Drivers As Employees

Uber In California would "almost certainly shut down" if a judge's ruling issued last week is upheld on appeal, according to Uber top official.

The said ruling of a California judge stated that ride-hailing companies such as Uber and Lyft are not exempted from a state law that identifies their drivers as employees rather than contractors, according to a report.

Brad Rosenthal, Uber's director of strategic, operational initiatives, said that if the company had to reclassify the bulk of its drivers as employees, rather than contractors, it would force the company to restructure its business model.

Lyft CEO John Zimmer said on Wednesday that the company would also likely halt its operations in California for the same reasons.

Uber CEO Dara Khosrowshahi would stop its operations in its home state of California until November.

Judge's Ruling

Judge Ethan Schulman of the San Francisco County Superior Court found that there was an "overwhelming likelihood" that these companies have been misclassifying their drivers as contractors rather than employees.

This was based on a law that took effect on January 1 this year and sought to clarify how the workers are classified.

The companies have avoided giving their drivers state-mandated benefits such as unemployment aid by identifying their drivers as independent contractors.

Many drivers have asked for unemployment benefits as they were unable to work due to the coronavirus pandemic but were told they did not qualify.

William Gould, a law professor at Stanford University, said that this is a great victory for the state of California, and the rule of law generally.

"I think that consumers and citizens of California generally, can and should welcome this decision," Gould was quoted in an NBC News report.

Both companies asked the judge to extend the hold period beyond ten days while they are beginning with their appeal process.

Schulman is set to hold a hearing on the issue on Thursday.

Khosrowshahi said it would "take a significant amount of time" to readjust if they will be forced to follow the judge's ruling.

He said that this would result in smaller services with much higher prices of Uber in California.

Khosrowshahi said it is the reality, and it is up to the courts, and they will comply with the law and will look to get going again.

Schulman said that Uber and Lyft managed to save millions of dollars every year by identifying their drivers as contractors.

However, the judge found that the companies have been violating a 2018 California Supreme Court decision and a state law based on that ruling known as AB5.

Khosrowshahi claimed that if the ruling were to be followed, it would put a lot of drivers out of work.

However, he addressed this statement by Khosrowshahi on Monday.

"But if the injunction the People seek will have far-reaching effects, they have only been exacerbated by Defendants' prolonged and brazen refusal to comply with California law," the judge said.

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