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The two largest rideshare companies on the market, Uber and Lyft, both threaten to temporarily terminate their services in California. Both the Uber CEO and Lyft CEO made the same threat when earlier this week a California judge ordered the companies to reclassify their drivers as employees.
They have a week to make an appeal to the judgement, though these companies state that they might terminate their services in California until after the passing of California Proposition 22 which will be on the Ballot for the November election. A ‘yes’ vote on this proposition would allow rideshare drivers to remain independent contractors. A ‘no’ vote on this proposition would enforce that they are treated as full-time employees.
Several lawsuits were filed against the companies for violating these classification regulations after the passing of California Assembly Bill 5 (AB5) that went into effect this year. AB5 requires independent contractors, also known as gig-economy workers, to be reclassified as employees with health insurance benefits, meal breaks, and employee protections.
Uber and Lyft push back against the bill, continuing to classify their drivers as independent contractors stating that their business model depends on the flexibility for drivers. They state that their drivers do not want to be full-time employees. So why push this regulation on them?
According to the rideshare driver’s rights group, Rideshare Drivers United, Uber and Lyft allegedly commit wage theft against their drivers. Rounding up these wage theft accusations, these companies owe their workers more than $1.3 billion in the state of California alone.
However, Uber and Lyft deny the allegations and argue that they already have a hard time profiting off of their business model. They state that the high costs of reclassifying their drivers as employees would force them to make mass layoffs to other drivers.
According to a report by NPR, amidst the coronavirus pandemic and decrease in business, both rideshare companies have already terminated thousands of positions. Uber laid off about 6,700 office employees and Lyft laid off about 1,000 drivers. Uber states to have already lost about a 75 percent downturn in business through its original service of offering private rides. The company states to be down 30 percent of its profits from last year.
Uber and Lyft rideshare attorneys throughout California await the news to learn what the final decision on the classification of rideshare drivers might entail for their clients.