BERKELEY, California (AP) — An appeals court has allowed ride-hailing giants Uber and Lyft to continue treating their drivers as independent contractors in California in a decision that will give the two companies a few more months to protect their business models in a key market.
The stay pauses a lower-court ruling that was scheduled to take effect at midnight yesterday and would have forced Uber and Lyft to treat all their drivers as employees. The companies said that such a change in status would be impossible to accomplish overnight and would have saddled them with a financial burden difficult for them to shoulder while they are still struggling to turn a profit.
Lyft told riders and drivers in a Thursday blog post that it planned to discontinue providing rides in California just before midnight without a stay.
Uber CEO Dara Khosrowshahi had repeatedly said its service would have no choice but to stop providing rides in California if the state’s law goes into effect because the company can’t just flip a switch and quickly hire about 50,000 drivers as employees.
A California shutdown would have dealt a staggering blow to Uber and Lyft at a time when both are still sustaining huge losses while the pandemic has scared off millions of riders who aren’t travelling as much or are worried about possible exposure to the novel coronavirus.
The state represents a big part of Uber and Lyft’s businesses. It accounted for nine per cent of Uber’s worldwide rides and food delivery service before the pandemic caused people to avoid traveling. California is even more important to Lyft, which doesn’t operate outside of the United States (US) besides Canada.
It accounted for 21 per cent of Lyft’s rides before the pandemic, but that figure dropped to 16 per cent during the April-June period as more people stayed at home and there were few places to go.