Uber and Lyft Get Reprieve After Threatening to Shut Down

OAKLAND, Calif. — Uber and Lyft threatened to suspend ride-hailing services throughout California on Thursday night, a defiant reaction to a judge who ordered the companies to reclassify their drivers as employees.

But hours before the ride-hailing blackout was set to begin, an appeals court granted Uber and Lyft a temporary reprieve, allowing them to continue operating while the court weighs their appeal. Oral arguments in the case are set for mid-October.

“We are glad that the court of appeal 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,” said Matt Kallman, a spokesman for Uber.

The fight could drag on for months, as Uber and Lyft battle a state labor law intended to give employment benefits to gig workers. An appeals court is weighing the companies’ requests to overturn a judge’s order to employ drivers, but it is not clear when the court will issue a ruling. The court has ordered Uber and Lyft to submit plans for hiring employees by early September, in case the court does not decide in their favor.

Uber and Lyft have long categorized drivers as independent contractors, an arrangement that the companies say allows drivers to have more control over where and when they drive. But this model imposes a financial burden on drivers, who are responsible for their own vehicle maintenance, health insurance and other expenses that employers traditionally cover.

Last year, the California Legislature passed A.B. 5 in an attempt to set clearer employment standards for the state and rein in gig-economy giants like Uber. Legislators argued that Uber shortchanged its drivers and exploited an unfair advantage over law-abiding businesses in the state.

Although the law went into effect in January, Uber and Lyft did not change their practices. They argued that A.B. 5 did not apply to them and spent tens of millions of dollars on a ballot initiative that, if passed in November, would exempt them from the law.

In May, California’s attorney general sued Uber and Lyft to force them to comply with A.B. 5. The standoff came to a head last week when a San Francisco Superior Court judge, Ethan Schulman, sided with the state, ordering Uber and Lyft to reclassify their drivers by Thursday.

Uber and Lyft have argued that they are technology companies and that drivers are not a core part of their business. But that “flies in the face of economic reality and common sense,” Judge Schulman wrote in his ruling. “Were this reasoning to be accepted, the rapidly expanding majority of industries that rely heavily on technology could with impunity deprive legions of workers of the basic protections afforded to employees by state labor and employment laws.”

“Our state and workers shouldn’t have to foot the bill when big businesses try to skip out on their responsibilities,” said the California attorney general, Xavier Becerra.

Rather than hire drivers, Uber and Lyft threatened to shut down. The decision could have caused the businesses, which have already struggled financially because of travel restrictions during the pandemic, to lose even more money.

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