Lyft reversed a decision to suspend service in California
Thursday after a California appeals court extended the length of time Uber and
Lyft have until they need to comply with an order to reclassify drivers as
employees.
Earlier Thursday, Lyft said in a blog post it would suspend
service in the state as of midnight PT.
Both companies now have until 5 p.m. PT on August 25 to file
written statements agreeing to expedited procedures required by the order. If
they agree to the terms, the stay will remain in place until the appeal is
resolved.
“While we won’t have to suspend operations tonight, we do
need to continue fighting for independence plus benefits for drivers,” a Lyft
spokesperson said in a statement following Thursday’s court order. “That’s the
solution on the ballot in November, and it’s the solution drivers want because
it preserves their ability to earn and to use the platform as they do now —
whenever they want — while also getting historic new benefits. Without it,
80-90% of Californians who earn on app-based platforms will lose that
opportunity.”
The court granted a preliminary injunction last week but
stayed it until Friday while the companies appealed.
Top executives at Uber and Lyft warned last week they would
likely have to suspend service to comply with the order, which meant
restructuring their operations and rehiring workers.
Uber has not made a formal announcement yet about suspending
service in California, but it is expected to do so.
Lyft’s stock tumbled 8.5% at one point Thursday following
the news but regained about half the losses. Uber shares were up slightly after
falling 3.2%.
The injunction was part of a lawsuit filed by California’s
attorney general and three city attorneys claiming Uber and Lyft skirted
expenses for workers by falsely classifying them as contractors rather than
employees. A judge granted the state’s request for an injunction, saying he was
unconvinced the companies met one of the key standards of the new state labor
law, Assembly Bill 5, which says contractors must do work outside the normal
course of the hiring firm’s business.
In a statement following Lyft’s decision to suspend service,
California AG Xavier Becerra said, “California is home to millions of
businesses and millions of workers. Every day, companies here protect their
workers’ rights and benefits. California is America’s economic engine because
innovation and worker rights go hand in hand. Any company that suggests
otherwise is peddling a false choice.”
Uber had planned to continue operating its food delivery
service in California even during the suspension period, an Uber executive told
the website Eater last week. The injunction targets ride-hailing drivers, but
scrutiny on food delivery services has already ramped up under AB5, with San
Francisco’s district attorney suing the app-based delivery service DoorDash,
claiming it misclassified workers.
Uber and Lyft have a chance to avoid further legal action
under AB5 with a November ballot measure they’re supporting. If voters support
Proposition 22, Uber, Lyft and other app-based ride-hailing and food delivery
services will be exempted from AB5. The measure also provides for additional
benefits for gig workers at such services.
As of Oct. 1, Lyft had about 305,000 drivers in California
who completed trips within the past year, though that number is likely far
lower now as the coronavirus pandemic has kept many riders from traveling. A
spokesperson did not immediately respond to a request for more recent figures.
Uber said in a recent blog post that its number of active
drivers per quarter in California is about 209,000.
San Jose Mayor Sam Liccardo, a Democrat, said the outcome of
Lyft leaving the state was disappointing.
“We simply don’t want to see more people going without
income, particularly when we know that there is a negotiated solution that we
have here,” Liccardo said in an interview on CNBC’s “The Exchange” Thursday. He
advocated for “portable” benefits along the lines of what Uber CEO Dara
Khosrowshahi has labeled a “third way.” Under the model, drivers working for
multiple app-based businesses could accumulate benefits based on the number of
hours they work no matter if they stick to one platform or not.
While a suspension could drum up support for the ballot
measure if riders miss the services, it will also present the opportunity for
competitors to swoop in. Two start-ups, Alto and Arcade City, have accelerated
plans to enter California amid the legal battle. Even existing services and
taxi drivers could seize the opportunity to gain back market share. Ridership
across the board is already low, however, as travel has stalled during the
coronavirus pandemic.
Still, a similar situation played out in Austin in 2016 when
Uber and Lyft suspended service there over a new background check law they said
would prolong their process of signing up drivers. While several new services
took hold, the two giants regained much of their customer base when they
returned after the state reversed the law.
In its announcement Thursday, Lyft encouraged voters to
support Prop 22 and said Californians could still use the Lyft app for bike,
scooter and car rentals.
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