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Lyft will temporarily shut down in California if forced to reclassify drivers

The company plans to appeal a court injunction issued earlier this week.
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SAN FRANCISCO, CALIFORNIA - AUGUST 12: A sign is posted in front of a Lyft driver center on August 12, 2020 in San Francisco, California. Lyft reported a 61 percent drop in second quarter revenues with earnings of $339.3 million compared to $867.3 million one year ago. (Photo by Justin Sullivan/Getty Images)
Justin Sullivan via Getty Images

Like Uber, Lyft says it may temporarily suspend service in California if it is required to classify drivers as employees rather than independent contractors. Lyft President Josh Zimmerman broke the news during an earnings call with investors yesterday.

Earlier this week, a California court issued an injunction, which would force Lyft and Uber to reclassify their workers. California is accusing the companies of not abiding by Assembly Bill 5 (AB5), which went into effect on January 1st, 2020. Lyft and Uber both said they’d appeal this week’s injunction, which has been stayed until August 20th. If the court upholds the injunction, the ridesharing companies say they’ll have no choice but to temporarily suspend service.

“If our efforts here are not successful, it would force us to suspend operations in California,” Zimmerman said. “Fortunately, California voters can make their voices heard by voting yes on Prop 22 in November.”

Proposition 22 is a ballot initiative that will allow voters to decide whether gig workers should be classified as employees or independent contractors. In the earnings call, Zimmerman said the majority of drivers wish to remain independent contractors. If Lyft is forced to classify drivers as employees, he said, 80 to 90 percent of California drivers and entire regions of the state would lose access to Lyft and Uber. 

Of course, classifying drivers as employees would mean gig economy businesses would have to provide benefits like minimum wage, overtime, paid breaks and reimbursement for, say, personal vehicle mileage. So while Lyft and Uber brag about how independent contractors have more flexibility, there’s also a financial incentive for these companies not to hire drivers as employees.

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