A PYMNTS Company

Lyft Suspending California Service, After Employee Classification Law

 |  August 20, 2020

Lyft said Thursday it is suspending service in California as of midnight PT because a court allowed a requirement that it reclassify drivers as employees. But, later in the day on Thursday a California appeals court extended how long Lyft and Uber have until they need to comply with an order to reclassify drivers as employees.

Both companies now have until 5 p.m. PT on August 25 to file written statements agreeing to expedited procedures required by the order.

The court granted a preliminary injunction last week but stayed it until Friday while the companies appealed.

Top executives at Uber and Lyft warned last week they would likely have to suspend service to comply with the order, which meant restructuring their operations and rehiring workers.
In January, a new law went into effect called AB5, which makes it more difficult for companies to use independent contractors. The law was mostly targeted at ride-sharing companies like Uber and Lyft, which have built their businesses on the concept of independent contractors shouldering the costs of their work.

In May, California Attorney General Xavier Becerra, along with city attorneys of Los Angeles, San Francisco, and San Diego, sued the companies, arguing that their drivers were misclassified as independent contractors when they should be employees under AB5. Becerra later filed a motion for a preliminary injunction that could compel the ride-hailing companies to classify drivers as employees immediately.