This all started last fall, when California Governor Gavin Newsom signed the state’s Assembly Bill 5 labor law. The legislation was meant to fix the gig economy by reclassifying workers as employees, but companies like Uber and Postmates quickly filed lawsuits calling the move unconstitutional.
Assembly Bill 5 was supposed to go into effect on January 1st, 2020. While Uber says it made changes and believes it’s in compliance, the state feels otherwise. Earlier this week, California won a preliminary injunction against Uber and Lyft. The court order could block the companies from classifying drivers as independent contractors. Uber and Lyft were given 10 days to appeal the ruling, and if things do not go in their favor, Khosrowshahi says Uber will temporarily suspend service in the state.
Shutting down Uber’s ridesharing service in California is obviously not ideal, especially when so many people are facing job insecurity due to the pandemic. But Khosrowshahi says Uber would have no other choice. The company would then wait until the November election, when California voters will be able to decide whether companies like Uber could keep drivers as freelancers.
Ultimately, if Uber is forced to classify its drivers as employees in California, Khosrowshahi says Uber’s model will change substantially. Users would likely see higher rates and fewer ride options. The service would also likely be concentrated in cities. Though, Khosrowshahi says he doesn't believe that outcome is likely.
It does sound a bit like Khosrowshahi is giving the state and courts an ultimatum, but he insists that Uber would simply have no other option and would need time to switch from its current gig model.