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Uber in California may shut down if drivers are forced into staff classification, says the CEO
On Wednesday MSNBC, CEO DARA Khosrowshahi stated that Uber could shut down its operations in California, one of its largest US markets, when it has to classify car drivers into employees.
Uber and Lyft had been ordered to classify their drivers as employees before this week by a California Superior Court judge. The question is whether riding hailers are independent contractors and most drivers prefer Uber and Lyft because they are flexible and are able to set their own time. But workers' trade unions and elected officials argue that they are denied traditional benefits, such as health insurance and compensation for workers.
Both companies said the ruling, which had stayed 10 days, would be appealed.
However, if their appeal fails, Khosrowshahi says, Uber may need to close the shop in California. "It is hard to believe that if the Court doesn't re-examine, then in California, we can change our model to a full-time job fast," he told MSNBC.
In May California Attorney General Xavier Becerra and Los Angeles, San Francisco and San Diego lawyers prosecuted Uber and Lyft on the grounds that their drivers were misclassified as independent contractors when the law AB5 was in force on 1 January.
Becerra later requested a provisional injunction to oblige drivers to immediately classify as employees. The so-called "ABC test," which was signed into law last September, enshrines if someone is a contractor or an employee.
Uber and Lyf's arguments — that the work of drivers is outside of the usual course of business — 'flies in the presence of the business of economic reality and common sense' — Superior Court Judge Ethan Schulman said in his ruling to favor Becerra's preliminary order.
The Uber and Lyft spokespersons did not reply to comments immediately.
Uber and Lyft are responsible for paying minimum income for the drivers if they are classified into employees, additional time, paid rest periods, and company driving costs, including personal vehicle kilometers, reimbursements. However, drivers do not receive any of these benefits as independent contractors.
The flourishing of legal proceedings and rulings in California is leading up to the November elections, when the state voters decide on a voting procedure with the support of Uber & Lyft that would override AB5, by classifying riders and other workers in the gig economics as self-employees. When the state determines that it breaches AB5, the voting measure is seen as a rear stop for Uber and Lyft.
