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Lyft, Uber Granted Reprieve Over Driver Ruling, Avert California Shutdown

SAN FRANCISCO (CBS SF / AP) – Lyft and Uber received a reprieve in from an appeals court Thursday, hours before the ride-hailing giants looked to shut down California operations stemming from a recent court ruling over the classification of drivers.

Earlier, the companies looked at shutting down their operations in the Golden State by the end of the day, after a San Francisco Superior Court judge issued an injunction last week saying the companies must reclassify drivers as employees.

"This is not something we wanted to do, as we know millions of Californians depend on Lyft for daily, essential trips," Lyft said Thursday in a statement before the stay was issued.

According to The Sacramento Bee, Uber was also set to shut down operations in the Golden State late Thursday night, barring court intervention. Last week, CEO Dara Khosrowshahi said his company could also shut down its California operations over the ruling.

"This [ruling] granted them a longer pause on the injunction against them," said Dara Kerr, senior reporter at CNET.

The pause allow the companies to continue classifying drivers as independent contractors and not full-time employees with benefits as required by Assembly Bill 5 (AB5). The fight now moves to election day and the battle over Proposition 22 - a ballot measure funded by the companies - which would continue to classify drivers as independent contractors.

Drivers protested outside Uber headquarters on Market Street in San Francisco Thursday ahead of the court ruling.

"This model of business that takes away workers' rights just because they work for an app can spread through any other industry," driver Edan Alva told KPIX 5.

"Vacations, workers compensation, paid sick days, so that's why we're asking for that, but this company instead of helping us, they put hundreds of millions of dollars on a ballot," Hector Castellanos, who drivers for Uber and Lyft.

San Francisco District 3 Supervisor Aaron Peskin says this isn't about ridesharing, but rights. 'It's all a political ploy. Even if they had shut down tomorrow, this is about trying to get voters in San Francisco and the state of California not to recognize workers' rights," he said.

California represents a substantial chunk of both companies' businesses. It accounted for 9% of Uber's worldwide rides before the pandemic caused people to avoid traveling. The state is even more important to Lyft, which doesn't operate outside of the U.S. besides Canada. California accounted for 21% of Lyft's rides before the pandemic, but that figure dropped to 16% during the April-June period as more people stayed at home and there were few places to go.

The unavailability of the two ride-hailing services also would have delivered another blow to the California economy by taking away the paychecks of Uber and Lyft drivers while also making it more difficult for people without cars to get around. That's why the mayors of San Diego and San Jose — two of the three largest cities in the state — joined forces this week urging the appeals court to block the law from going into effect.

"Being forced into a situation where shutting down service is the only viable option hurts everyone at a moment when we need to pull together to help more Californians make ends meet," said San Diego Mayor Faulconer, a Republican, and San Jose Mayor Sam Liccardo, a Democrat.

Both companies had sought the stay of the August 10 court decision that ruled they must start treating their drivers as employees, not independent contractors, by Friday morning.

The injunction was part of a lawsuit brought on by the State of California and city attorneys in San Francisco, Los Angeles and San Diego alleging the ride-hailing giants violated AB5, claiming they "exploited hundreds of thousands of California workers" by classifying drivers as independent contractors instead of employees.

The companies are hoping to overturn the California law underlying the lower-court decision with a ballot initiative in the upcoming election. Uber and Lyft are among the biggest contributors to a $110 million effort to get the initiative, Proposition 22, passed to rescind the law. Lyft urged for passage of the initiative in its blog post.

At issue is a decision that could re-shape the so-called gig economy as drivers, delivery workers and others who work for popular apps on an as-needed basis seek improved working conditions and benefits that many in the workforce enjoy.

The ride-hailing companies have argued that they're technology companies, not transportation companies, so drivers are not a core part of their business.

California officials say treating drivers as contractors harms more than just drivers, since the companies don't contribute to the state's dwindling unemployment insurance fund on the drivers' behalf.

Oral arguments on the injunction will be heard in mid-October.


Andria Borba contributed to this report

© Copyright 2020 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.

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