Uber and Lyft really might suspend operations in California

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Are Lyft and Uber just bluffing?

After a judge declined to carve out an exemption for them the state law that would require the companies to classify drivers, from AB5 both services threatened to temporarily shut down their operations in California.

The court injunction gave Uber and Lyft 10 days from the Aug. 10 judgment to change the independent-contractor status of the drivers and supply them benefits like health insurance and minimum wage. The firms, which are appealing the judgment, already have lost a bid to extend the 10-day stay on the injunction, firming up the deadline to reclassify the drivers–or suspend operations in the country –by Aug. 20.

California is a market for each, and home to both brands. Leaving would be a risk for Uber and Lyft, but for tens of thousands of drivers depending on the firms for income, and for the clients depending on them for transportation.

That’s just the type of pressure that might help bolster support a California ballot initiative backed to exempt them from having to re-classify drivers as employees.

A scene for Uber

This is a familiar scene for Uber, which has regularly threatened cities and appealed to customers when confronted with regulations that would alter its business model. In 2015, when New York City contemplated putting a cap on the amount of vehicles, Uber launched an aggressive campaign in response, positioning cab drivers as having a history of discriminating against people of color. In 2016, Uber abandoned Austin, Texas, after the city council’s town began requiring enhanced background checks for drivers. Uber returned the following year after the Texas governor signed a law overriding the rules of the city.

If Uber and Lyft were to leave California, the earnings impact to both would be relatively restricted due. Rides have been down at least 80 percent in California for Uber and Lyft, according to data from the research firm Second Measures.

“Given the gloomy ride volumes now due to the outbreak, this is possibly the ideal time for [Uber and Lyft] to have to try it,” says Tom White, an analyst at DA Davidson. “It could inspire voters even more to attract ride-sharing back to California from the election.”

Whether Uber and Lyft follow through with their threat, it’s clear both companies intend to double back on their attempts to acquire on Prop 22, rather than shifting their business models.

Uber, while resisting the regulation of AB5, has been supplying concessions on flexible work. Ahead of the new California court ruling, Uber CEO Dara Khosrowshahi wrote in a New York Times op-ed concerning the need for a”third way,” which would give drivers a safety net while maintaining their independent status.

But Brian Chen, a lawyer at the National Employment Law Project, says there is nothing in the law that requires an employee to give up flexibility. “It’s just another threat by the firms, that if they are held accountable by the general public, they’re going to take it out on their employees,” he says. (Uber has warned that if it’s forced to re-classify drivers as employees, there will be fewer drivers on the road and costs will increase.)

Since AB5 went into effect in Uber California and Lyft both have faced increasing pressure elsewhere. Just in recent weeks, Pennsylvania’s highest court upheld an UberX driver’s eligibility while in Massachusetts the state attorney general sued Lyft and Uber, challenging how they classify drivers.

Meanwhile, the pandemic is currently laying stark the inequalities between different types of workers. The heightened attention on the treatment of workers could sway voters’ opinions, labour organizers say.

“The calls for them to modify their exploitative business model are growing louder by the day,” says Steve Smith, a spokesperson for the California Labor Federation. “We’re confident that voters don’t have any appetite to give these companies a free pass to keep on cheating employees and shifting the burden rather to taxpayers.”

Postmates, and uber, Lyft DoorDash have raised to back Prop 22, which would make motorists eligible for minimum earnings, health care subsidies, and vehicle insurance but wouldn’t classify them. However voters decide the question, it change the landscape and might become a model for other states.

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