Uber CEO Dara Khosrowshahi said Wednesday that the ride-hailing service would be forced to temporarily shut down in California if a judge’s ruling compelling it to classify its drivers as employees instead of contractors is upheld.
A San Francisco Superior Court judge ruled earlier this week that Uber and Lyft must classify drivers as employees rather than independent contractors. The ruling came down following California state and local officials’ attempt to make the companies comply with Assembly Bill 5 (AB5), a new law that enforces more stringent restrictions on employee classifications.
The judge granted a 10-day stay for the ruling, and Uber and Lyft said they planned to appeal. The companies are also supporting a measure that will appear on the November ballot in California exempting gig companies from AB5.
Speaking on MSNBC, Khosrowshahi said he hoped the court would hold off on making a decision until after the election, or else the company would be forced to stop its service for at least three months.
“We think we comply by the laws, but if the court finds that we’re not and they don’t give us a stay to get to November, then we’ll have to essentially shut down Uber until November when the voters decide,” he said, adding that it would take a “significant amount of time” to move away from its current system designating drivers as independent contractors.
“It would be really unfortunate at a historic time of an unemployment in California. It would put vast swaths of our drivers out of work,” he said. “It would take away transportation for hundreds of thousands of Californians.”
So-called gig economy firms such as Uber, Lyft and DoorDash have faced increasing scrutiny in recent years over their classification of workers as contractors, which generally denies them employer-based benefits such as health care and paid time off.
In California, Attorney General Xavier Becerra and a group of city attorneys filed a lawsuit against Uber and Lyft alleging that their designations of drivers violated state law. AB5 requires companies to designate its workers as employees if their tasks are a routine part of a company’s core business, among other things.
Uber and Lyft have held that their core business is offering technology platforms, but Judge Ethan Schulman rejected that argument in his decision, saying that “drivers do not perform work that is ‘outside the usual course’ of their business.”
Khosrowshahi told MSNBC that a requirement for drivers to be employees would likely lead to higher prices and services that are primarily targeted in cities rather than rural and suburban areas. The CEO earlier this week argued in a New York Times op-ed that drivers enjoy the flexibility offered as independent contractors and that legislators should issue a “third way” for gig workers to get more protections.
Uber has already experienced a marked decline in revenue and ridership amid the coronavirus pandemic. The company last week reported a 30 percent year-over-year drop in revenue in the second quarter of 2020, its steepest decline since going public in May 2019.