Lyft will suspend service in California after ordered to classify drivers as employees

A driver adjusts his face masks as Uber and Lyft drivers with Rideshare Drivers United and the Transport Employees Union of America conduct a ‘caravan protest’ outdoors the California Labor Commissioner’s workplace amidst the coronavirus pandemic on April 16, 2020 in Los Angeles, California. (Photograph by Mario Tama/Getty Photos)

Mario Tama

Lyft will droop service in California at 11:59 Pacific Time Thursday after a courtroom granted a preliminary injunction final week requiring it to reclassify drivers as workers, the corporate mentioned in a blog post. The injunction was stayed for ten days whereas the businesses appealed, however is ready to enter impact Friday.

High executives at Uber and Lyft warned final week they’d doubtless must droop service to adjust to the courtroom order, which might contain them restructuring their operations and re-hiring employees. 

Uber has not made a proper announcement but about suspending service in California, however it’s anticipated to take action.

Lyft’s inventory was down 8% Thursday following the information. Uber shares had been down 3%.

The injunction was a part of a lawsuit filed by California’s legal professional basic and three metropolis attorneys claiming Uber and Lyft skirted bills for employees by falsely classifying them as contractors reasonably than workers. A decide granted the state’s request for an injunction, saying he was unconvinced the businesses met one of many key requirements of the brand new state labor regulation, Assembly Bill 5 (AB5), which says contractors should do work outdoors the traditional course of the hiring agency’s enterprise. 

Uber had deliberate to proceed working its meals supply service in California even in the course of the suspension interval, an Uber govt informed Eater final week. The injunction targets ride-hailing drivers, however scrutiny on meals supply providers has already ramped up underneath AB5, with San Francisco’s district legal professional suing the app-based delivery service DoorDash for misclassifying workers.

Uber and Lyft have an opportunity to keep away from additional authorized motion underneath AB5 with a poll measure they’re supporting in November. If voters assist Proposition 22, Uber, Lyft and different app-based ride-hailing and meals supply providers shall be exempted from AB5. The measure additionally offers for added advantages for gig employees at such providers.

Whereas a suspension might drum up assist for the poll measure if riders miss the providers, it’ll additionally current the chance for opponents to swoop in. Two start-ups, Alto and Arcade Metropolis, have accelerated plans to enter California amid the legal battle. Even present providers and taxi drivers might seize on the chance to realize again market share. Ridership throughout the board is already low, nonetheless, as journey has stalled in the course of the coronavirus pandemic. 

Nonetheless, an identical state of affairs performed out in Austin in 2016 when Uber and Lyft suspended service there over a brand new background verify regulation they mentioned would extend their technique of signing up drivers. Whereas a number of new providers took maintain, the 2 giants regained a lot of their buyer base once they returned after the state reversed the regulation.

In its weblog submit, Lyft inspired voters to assist Proposition 22 in November. It additionally mentioned California residents might still use the Lyft app for bike, scooter and automobile leases.

This story is creating. Examine again for updates.

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WATCH: Uber and Lyft respond to California injunction ruling

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PJ is the Digital Marketer & Founder of PJ Digital Marketing, has involved in this field from 2010 onwards. Also the owner of a few more sites in different fields.