Legal

Uber, Lyft Granted Reprieve In California

Judge: Uber, Lyft Can't Call Drivers Contractors

The California appellate court has given Uber and Lyft more time to comply with an order requiring them to reclassify drivers as employees, CNBC reported Thursday (Aug. 20).

Now, the rideshare companies have until Aug. 25 to meet the court order.

Executives at Uber and Lyft had said they would be forced to suspend service in California to meet the letter of the law.

Lyft reversed its decision to suspend service after the appeals court issued its ruling, according to a statement on its company blog. "The California court has granted our request for a further stay, so our rideshare operations can continue uninterrupted, for now," the company said.

Last week, a California judge ruled Uber and Lyft must end their practice of categorizing their workforce as gig workers in favor of classifying them as employees by Thursday (Aug. 20). The change would provide drivers with benefits such as sick and vacation pay, unemployment insurance, workers’ compensation insurance and healthcare.

The judgment followed California Attorney General Xavier Becerra’s lawsuit against Uber and Lyft for violating the state’s new Assembly Bill 5 (AB5) labor law.

Earlier Thursday, PYMNTS reported that unless an appeals court intervened at the last minute, Uber and Lyft were prepared to suspend their ride-hailing services. Lyft told its customers and drivers that its rideshare operations in California would be suspended at 11:59 a.m. on Thursday.

On Wednesday (Aug. 19), Uber CEO Dara Khosrowshahi said his company is incapable of employing all of its drivers in California, as a judge has ordered it to do, TheVerge reported.

“We can’t go out and hire 50,000 people overnight,” Khosrowshahi said on the Pivot School podcast. “Everything that we have built is based on this platform that … brings people who want transportation or delivery together. You can’t flip that overnight.”

Last week, Uber and Lyft said if forced to comply, they would likely curb service at least temporarily as the companies consider an appeal or a stay of the ruling. They have warned California customers of the potentially imminent shutdown.

In November, voters will be asked to approve a ballot initiative that would exempt ride-hailing businesses from the law.

Two startups told CNBC they are accelerating plans to enter the California market amid the potential gap in service.

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