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Uber, Lyft Get Months To Comply With Driver Classification Ruling

In the wake of the latest developments in Uber Technologies, Inc. (NYSE: UBER) and Lyft, Inc. (NASDAQ: LYFT) battle to keep their California drivers as independent contractors rather than employees, a few dates loom large

Benzinga · 08/21/2020 18:13

In the wake of the latest developments in Uber Technologies, Inc. (NYSE:UBER) and Lyft, Inc. (NASDAQ:LYFT) battle to keep their California drivers as independent contractors rather than employees, a few dates loom large.

The calendar became a little clearer Thursday when a state appellate court continued the stay that is allowing the two ride-sharing companies to sidestep an earlier court decision that would require their drivers to be made employees. That mandate handed down earlier this month by a California Superior Court comes out of the law built into California's AB5 that limits the ability of many employers to keep their workers as independent contractors rather than employees.

The lower court on Aug. 10 had issued a preliminary injunction that had stopped Lyft and Uber from classifying their drivers as independent contractors. Judge Ethan Schulman, who handed down that ruling in San Francisco Superior Court, also handed down a 10-day stay of implementation of his order while the companies appealed. They did so and the continuation of the stay was issued by the appellate court 10 days after Judge Schulman's decision. 

In the meantime, the two companies had said they would shut down their California operations as they figured their next move to operate while in essence completely overhauling their business model that had their drivers as independent contractors..

The first date on the calendar to determine the fate of the Uber/Lyft battle against AB5 is Tuesday, when the two companies need to file "written consents" to the procedures spelled out by the appellate court. The stay would expire if the two companies failed to make those filings, but it is expected the two companies will act by then.

The second date is Oct. 13, when oral arguments in the appeal will be heard. (There are other required filing dates prior to Oct. 13).

The third date is Election Day, Nov. 3, when California voters will cast their votes on a referendum that would exempt the two companies from AB5.

But there is another date even before those two that matter. The appeals court ruled that before Sept. 4, both Uber and Lyft needed to file a statement from their respective CEOs that they have developed "implementation plans under which … the company will be prepared to comply with the preliminary injunction (requiring adherence to AB5 and the conversion of contractors to employees) within no more than 30 days" after a final decision in the appeal and if the ballot initiative fails. 

The threat to leave the state is not one of permanence. Earlier this week Uber CEO Dara Khosrowshahi said on the "Pivot School" podcast that it intends to stay in California somehow. 

In a recap of the podcast carried by The Verge, Khosrowshahi said that to comply with the superior court judge's order would have required hiring 50,000 people "overnight." 

"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," he was quoted as saying. 

But he added that "it'll take time but we're going to figure out a way to be in California. We want to be in California." 

One possibility that had been rumored and which Khosrowshahi confirmed on the podcast would be a franchise model in which fleets of various sizes become franchises and the drivers would be employees of the franchise holders. 

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