Uber and Lyft will continue their ride-hailing services in California after an emergency order was granted to give them more time to adhere to new worker laws.
It was possible that both companies would choose to withdraw from the area due to a recent court ruling that requires ride-hailing services to classify their drivers as employees, rather than independent contractors.
California's Assembly Bill 5 (AB5), signed into law by Governor Gavin Newsom, aims to protect gig economy workers from exploitation. While there are some exceptions made to protect freelancers including writers, the bill was centered on Uber and Lyft -- and the differences between the definition of gig worker and employee.
Employees, for example, could be entitled to health insurance, paid sick leave, overtime, and both disability and unemployment protection in California, whereas independent contractors would not be.
AB5 claims the "misclassification of workers as independent contractors has been a significant factor in the rise in income inequality."
The bill, which came into effect in January, sets out a "three-pronged" approach -- also known as the ABC test -- to determine whether or not a worker should be considered an employee or contractor.
Gig economy jobs, ranging from driving and delivery to odd-job services, originally gained traction for side hustles and as a means to generate additional income. However, for many, the gig worker model is linked to primary sources of revenue.
A lawsuit filed against both Uber and Lyft claimed that the firms were violating AB5, alleging that hundreds of thousands of workers in California are being "exploited" by the gig economy model.
Despite protests that the organizations are technology platforms and not transport providers, an injunction was placed upon them, forcing the companies to reclassify their drivers.
Rather than completely changing the gig-economy business models to comply with AB5 -- and picking up the new 'employee' bill as a result -- Uber said the ride-hailing service would be suspended in the area. Lyft, too, made plans to suspend services, saying that it "wasn't possible to overhaul our business model and operations in ten days."
However, both Uber and Lyft now have some breathing space to consider their next move. As reported by sister site CNET, an appeals court has granted an emergency stay to give Uber and Lyft more time -- and so ride-hailing services will carry on as normal in California.
At least, for now.
"The California court has granted our request for a further stay, so our rideshare operations can continue uninterrupted, for now," Lyft said in an update. "Thanks to the tens of thousands of drivers, riders, and public officials who urged California to keep rideshare available for so many people who depend on it."
Uber and Lyft are attempting to fight the order through a ballot, dubbed Proposition 22, which provides an alternative to AB5. The ballot would override AB5 for "app-based drivers" and exempt them from AB5 requirements.
While not every Uber or Lyft driver may want to be considered an employee in light of the flexibility operating as an independent contractor offers, local media reports suggest protests are taking place outside Los Angeles International Airport (LAX) by other drives, demanding that Uber and Lyft take them seriously and make the changes required by AB5.
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In related news this week, Uber's former chief security officer (CSO) was charged on Thursday for taking "deliberate" steps to cover up a data breach occurring at the company in 2016.
Prosecutors claim that Joe Sullivan misled the Federal Trade Commission (FTC) concerning the data breach, in which the personally identifiable information (PII) of 57 million customers -- alongside 600,000 drivers -- was stolen.
Previous and related coverage
- Uber's Q2 highlights COVID-19 economy shifts, worries
- Uber drivers demand to see algorithms, data that determines their working lives
- Uber's future may be more about Uber Eats, Uber Freight than ride sharing
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