Aug 13, 2020
Uber may temporarily shut down in California due to driver reclassification issues
AB5 is causing big trouble for rideshare services
Uber has quickly become a normal part of our lives. For many people, it would be strange to hail a yellow taxi cab to get around. However, that could become reality in California as the result of a recent court ruling.
Companies like Uber and Lyft were ordered to classify their drivers as employees. This causes a host of issues for the rideshare companies as they must scramble to comply with the order.
Unfortunately, it may cause a big disruption to the rideshare industry. On Wednesday, Uber CEO Dara Khosrowshahi told MSNBC, “If the court doesn’t reconsider, then in California, it’s hard to believe we’ll be able to switch our model to full-time employment quickly.”
In other words, Uber could be heading towards a temporary shutdown in its largest U.S. market.
AB5 Fallout
To understand why Uber might need to halt its California operations, it’s important to take a step back and look at what has transpired in the past year. In January, legislation called AB5 officially went into effect.
While AB5 aims to help protect gig workers like Uber and Lyft drivers, many people have a problem with how the legislation is carried out. Prior to the law, rideshare drivers worked as independent contractors.
This means they don’t get benefits like health insurance or paid time off. However, it also gives them the ability to do things like set their own schedule and work a flexible number of hours.
For that reason, many rideshare drivers are actually against the AB5 law.
That wasn’t enough to stop labor unions and elected officials from pushing it through the system. In May, California Attorney General Xavier Becerra took things a step further by suing Uber and Lyft. The lawsuit argued that drivers were misclassified as independent contractors when they should have been employees under AB5.
In response to that lawsuit, a California superior court judge ruled on Monday that Uber and Lyft must classify their drivers as employees.
That brings us to Wednesday.
Khosrowshahi’s statements are certainly uncomfortable. He said during the MSNBC interview, “We think we comply by the laws, but if the judge and the court find that we’re not, and if they don’t give us a stay to get to November, then we’ll essentially have to shut down Uber until November when the voters decide.”
Why November?
Fortunately, Uber isn’t going anywhere permanently. A temporary shutdown would help get the rideshare company to a crucial vote on California’s election day in November. Then, California residents will be able to vote on Proposition 22.
The ballot measure would override AB5 if it succeeds, allowing Uber drivers and other gig economy workers — like DoorDash drivers — to stay classified as independent contractors. It will be very interesting to see if the state’s residents do indeed favor that classification. If so, the complications currently being caused by AB5 would become something of an afterthought.
In the meantime, Uber and Lyft have 10 days until Monday’s ruling becomes enforceable. The rideshare giants will use that time to make an appeal. If a judge does not grant the companies a respite until the November vote, California residents will be looking for a new way to get around. Of course, many will also be looking for a new job.
Originally published at https://www.theburnin.com on August 11, 2020.
