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Lyft said Thursday it would suspend service in the state by the end of the day if an appeals court did not grant its request to delay an order to reclassify its drivers as employees. Uber said earlier this week that it would also suspend service at midnight on Thursday.
“This is not something we wanted to do because we know millions of Californians depend on Lyft for their essential daily travel,” Lyft wrote in a blog post Thursday.
As part of an ongoing lawsuit, a California court last week ordered companies to reclassify their drivers in the state as employees rather than independent contractors within 10 days.
In response to the court order, which was due to go into effect 10 days after its announcement, the two companies warned that they could suspend their operations in California. Each has linked the warnings to pushing for a referendum in November to exempt them from the law, known as AB-5, if they cannot successfully appeal for a longer stay of the order.
While their first appeal attempt to stay the order was unsuccessful last week, Uber and Lyft have since filed appeals with a California appeals court.
Their decision to go ahead with discontinuing service poses a risk to both companies. Not only will they lose business in a state with an economy larger than most countries, but industry watchers say there is no guarantee that stopping service will garner so much support from the share of customers it could have before the pandemic reduces the demand for rides.
But a reclassification of workers would represent a radical change imposed on both companies. Both Uber and Lyft have built up huge fleets of drivers, treating them like independent contractors. Making drivers contractors rather than employees means they are denied benefits like minimum wage, overtime pay, workers’ compensation, unemployment insurance and paid sick leave.
Under AB-5, which entered into force on January 1, companies must prove that workers are free from all control of the company and perform work outside the ordinary course of business in order classify workers as independent contractors rather than employees.
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