Lyft was about to shut down all California rideshare operations at the stroke of midnight, but an appeals court granted a reprieve only about 12 hours before that would have happened.
At 11:30 a.m. this morning, the Lyft app was displaying the message seen in the screenshot below: “As the result of a court order, we’ll be suspending rideshare throughout California at 11:59 PM PT on Thursday, August 20. We did everything we could to prevent this and keep Lyft available for you, but it wasn't possible to overhaul our business model and operations.” Uber, too, was making the same threat, albeit without a specific date, hour and minute attached, as the companies were being required to hire their drivers as employees under the recent California AB-5 gig worker law.
But a last-minute shocker just bought both companies at least a couple more months of business as usual, as the New York Times reports an appeals court has granted them a reprieve on the previous deadline to hire their drivers. The reprieve lasts until a separate appeal of the rideshare companies’ previous court loss is ruled upon, for which the Times notes arguments are “set for mid-October.”
latest on the standoff between Uber/Lyft and California: https://t.co/ZDiIohU5zC— kate conger (@kateconger) August 20, 2020
“We are glad that the court of appeals recognized the important questions raised in this case, and that access to these critical services won’t be cut off while we continue to advocate for drivers’ ability to work with the freedom they want,” Uber spokesperson Matt Kallman said in a statement to the Times.
Uber & Lyft say they’ll have to shut down at 12am Friday because they can’t make drivers employees overnight. But they’ve had nearly a year to come up with an employment model. “The only people who put themselves against the wall have been Lyft and Uber.” https://t.co/0kzmnMtFsV— Faiz Siddiqui (@faizsays) August 19, 2020
The whole argument comes down to AB-5’s requirement that the rideshare companies make their drivers employees rather than independent contractors, which would give drivers minimum wage requirements, workers' comp, sick leave, and other benefits they currently lack. Lyft and Uber argued in court that they are “multi-sided platforms” and drivers are not a core part of their business, a claim San Francisco Superior Court Judge Ethan P. Schulman shot down last week saying it “flies in the face of economic reality and common sense.”
The ongoing legal appeals and wrangling will likely continue to wrangle, until state voters ultimately decide on the Prop. 22 measure in November, which both companies have poured at least $30 million apiece into supporting (that measure would specifically exempt delivery and rideshare drivers from AB-5). But even if that measure fails, it seems the companies have yet another backup plan. The Times reported earlier this week that both companies were looking into establishing a franchise model where the Uber and Lyft brands could be licensed out to vehicle fleets, who would then be the employers of the drivers. It sounds complicated, but Uber already does this in Germany and Spain.
In other words, just as Uber and Lyft may never be profitable in our lifetimes, they may never pay drivers minimum wage in our lifetimes, if there’s anything they can do to avoid it.
Image: @thoughtcatalog via Unsplash