Uber and Lyft Threaten to Suspend Operations in California

Court Driver Opposes Regular Employment Order
Immediately Expresses Intention to Appeal

[Image source=AP Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Ride-sharing service companies Uber and Lyft have threatened to suspend operations in response to a California court order mandating the regular employment of drivers.

According to CNBC on the 12th (local time), Dara Khosrowshahi, CEO of Uber, stated, "If the court order to convert Uber drivers to regular employees is not changed, we will have to suspend services in California by November." John Zimmer, co-founder and CEO of Lyft, also said during the Q2 earnings conference call that "if the court does not overturn the decision, we may have to stop ride-hailing operations in California starting the 21st."

The San Francisco Superior Court in California issued a preliminary injunction on the 10th, ordering Uber and Lyft drivers in the state to be reclassified as employees rather than contractors. This ruling follows a law enacted by the California state government in January requiring ride-sharing and delivery drivers to be reclassified as regular employees. The state government determined that these companies' drivers and delivery workers are effectively employees but are classified as contractors, thus not receiving benefits such as minimum wage, paid leave, and unemployment insurance.

Uber and Lyft immediately expressed their intention to appeal. Uber stated, "We cannot change our business model overnight," and argued, "California should focus on job creation rather than shutting down the entire industry." They also announced that if they lose the appeal, their 'Plan B' is to temporarily suspend services in California.

These companies are particularly pinning their hopes on a November referendum. A ballot measure, 'Proposition 22,' which would exempt ride-hailing and food delivery workers from being treated as employees under the law, is scheduled for a public vote. In the U.S., state laws can be subjected to referendums where residents directly express their approval or disapproval. If the proposition receives majority support, ride-sharing companies can maintain the current system.

Lyft also stated, "Drivers do not want to become employees," adding, "This issue will ultimately be decided by California voters."

CNBC forecasted that this decision will further narrow the position of ride-sharing companies. Since they have created many jobs based on labor flexibility, the legal status controversy of platform workers is expected to shake the business model itself.