California judge halts injunction forcing Lyft and Uber to treat drivers as employees as they threaten to leave state

Companies sponsoring Proposition 22 in bid to allow drivers be classified as independent contractors

A California appeals court granted a stay on an injunction Thursday that would have forced Uber and Lyft to re-classify their contract workers as employees after the companies threatened to shut down their operations in the state.

The companies recently lost a court battle against Assembly Bill 5, which would have forced the companies to treat their contract-drivers as employees, which would have forced the companies to provide them with benefits, sick leave, minimum wage and access to workers’ compensation benefits.

Uber and Lyft have been fighting to either have the legislation killed or to write in loopholes exempting them from the rules.

Both companies threatened to close their operations in the state if their appeal was unsuccessful.

In a blog post published Thursday, Lyft published a blog post explaining its opposition to the legislation.

“This is not something we wanted to do, as we know millions of Californians depend on Lyft for daily, essential trips,” the post said. “For multiple years, we’ve been advocating for a path to offer benefits to drivers who use the Lyft platform -- including a minimum earnings guarantee and a healthcare subsidy -- while maintaining the flexibility and control that independent contractors enjoy. This is something drivers have told us over and over again that they want.”

The post went on to claim that the legislation was driven by politicians and was not something their drivers wanted.

“Instead, what Sacramento politicians are pushing is an employment model that 4 out of 5 drivers don’t support. This change would also necessitate an overhaul of the entire business model – it’s not a switch that can be flipped overnight,” the post said.

The lawsuit was brought to court by the city attorneys of San Diego, Los Angeles and San Francisco, as well as California Attorney General Xavier Becerra. The plaintiffs claimed that Lyft and Uber were denying their employees proper compensation and benefits that “they have earned through the dignity of their labour.”

The companies are attempting to undermine AB5 by sponsoring their own proposal, Proposition 22, which would allow rideshare drivers to work as independent contractors, effectively circumventing the regulations that AB5 would put in place.

San Diego Mayor Kevin Faulconer and San Jose Mayor Sam Liccardo called on the appeals court to stay the injunction, citing fears of job losses due to the companies shutting down their operations.

We Drive Progress, a group of app-based drivers in Northern California supporting regulations on the companies that would make them employees, shared the thoughts of a driver that likened the companies to “children” throwing a “temper tantrum.”

“These wealthy CEOs are acting like children. They’re throwing a temper tantrum [because] they didn’t get their way and weren’t allowed to continue flouting the law to exploit us,” the driver said. “Now they want to take their ball and go home. It’s shameful and obscene.”

Another progressive activist group, Gig Workers Rising, handed out personal protective equipment to drivers Thursday.

“Why are we outside Uber’s HQ today? Because Uber and Lyft are throwing a temper tantrum. They’re threatening to shut down and kill countless jobs because they aren’t being allowed to disregard the law and basic labour standards,” the group tweeted. “When companies refuse to follow the law and protect workers, we take care of us.”

Both companies said they were considering alternative business models, including franchising fleets to individuals under the companies’ names. An Uber spokesman suggested the model would result in “higher prices” and “less reliability” and questioned whether the model would be viable in California.

“This is similar to how Uber Black operated a decade ago, with higher prices and less reliability,” the spokesman told CNN Business. “In some models, drivers bring their own cars; in others, the cars are owned by the fleet. We are not sure whether a fleet model would ultimately be viable in California.”

A spokesperson for Lyft said they would continue to fight the legislation but were happy with the ruling.

“While we won’t have to suspend operations tonight, we do need to continue fighting for independence plus benefits for drivers,” the Lyft spokesperson said in a statement.