The report comes just days after a California High Court judge ordered Uber and Lyft to begin classifying drivers as employees.
Uber CEO Dara Khosrowshahi has warned that Uber will have to halt operations in California if it is forced to classify drivers as employees.
- Uber CEO Dara Khosrowshahi said the company could not make such an immediate change.
- If the verdict is upheld, Uber should start treating its workers as employees.
- Stopping operations would be a huge blow to the Californians and the Uber grassroots.
- Uber and Lyft must begin to classify their workers as employees.
The report comes just days after a California High Court judge ordered Uber and Lyft to begin classifying drivers as employees against contract workers in a preliminary restraining order.
A preliminary injunction requires both ride-sharing companies Lyft and Uber to classify their drivers as employees because of a new California labor law. The ruling is expected to take effect in about a week.
Is Uber leaving California?
Responding in an interview on Wednesday, Uber CEO Dara Khosrowshahi said the company could not make such an immediate change and should suspend interim operations in California.
“In California, it is hard to believe that our model can be quickly transferred to full-time work unless the court reconsiders,” Khosrowshahi said of the ruling.
In a densely populated state largely designed for car travel, demand for ride-share services has skyrocketed. Stopping operations would be a huge blow to the Californians and the Uber grassroots.
Lawsuits and laws
Tensions between Uber and the Lyft are not new to the state of California.
Last September, the government passed Legislative Bill 5 (AB5), which sets out how companies can classify their workers. Companies should use the “ABC Test” to determine if workers should be treated as employees.
According to the AB5 Act, a worker is an independent contractor if they are:
- May be freed from the control and direction of the hiring company concerning the performance of the work;
- Doing work that is outside the normal course of the hiring company’s business;
- Engaged in an independent business that does the same type of work for the hiring company.
An example of an independent contractor is a construction worker. Construction workers are often employees of third-party companies who then outsource their labor to any other company.
When a construction worker is working on a project for a Marriott hotel, they are not working on a Marriott. They do contract work for them while they work for their construction company.
Uber argues that this provision applies to their drivers as well. But Uber drivers are not hired by some outside companies – they work for Uber. The whole company would not exist without its drivers. They are fully integrated into the basic operations of the company.
Accordingly, High Court Judge Ethan Schulman said the Uber and Lyft argument “otherwise flies in the face of economic reality and common sense.”
According to Judge Schulman, companies are blatantly violating California law by classifying drivers as independent contractors or “kick workers.”
Will Uber accept to classify drivers in California?
If the verdict is upheld, Uber should start treating its workers as employees. This means reimbursement of the minimum wage, overtime compensation, paid leisure time and driving expenses.
These are the increase in costs that rider-saluting companies are afraid of. They were the first to provoke a legal battle.
Uber’s profit margins are already alarming, spurring their relentless effort to develop self-driving technology. But until the technology and regulations of automatic driving reach the mainstream (which may be a decade or more from now), there is no other option but to trust human drivers.
Still, it is not yet clear whether Khosrowshahi’s statement is true or false. Uber is unlikely to deviate from its largest market. Instead, Khosrowshahi’s messaging may be an attempt to support the company’s position by withholding services from interested customers.
In November, Californians will vote on a measure called Proposition 22, which is backed by Uber and the Lyft. These polls will allow ride-haul drivers to be considered independent contractors.
Threatening to shut down all operations in the Golden State is a great way for distrustful travellers to vote in favour of the proposal.