California Blinks: Uber/Lyft Granted Extension on New Labor Laws

The battle between the purveyors of ride-hailing apps and the State of California has been an interesting one. The West Coast’s gig economy looked ready to be nuked from orbit following the passing of Assembly Bill 5 (AB5), leaving a glassy crater of jobless part-timers and the corporations that were dependent upon them — even though the stated goal of the rule was to protect gig workers from being taken advantage of.

Uber and Lyft looked to be the most impacted by the new law, as their entire business structure revolves around managing fares for drivers whose status as “independent contractors” was up for debate.

Claiming that hiring drivers as full-fledged employees would make the existing business model untenable, Uber and Lyft suggested they were looking into alternative solutions while fighting legal battles that would effectively make them exempt from the new law. San Francisco Superior Court Judge Ethan P. Schulman threw cold water on that concept when he ruled against the duo, saying drivers were essential to ride-hailing operations and needed to be treated as regular employees receiving the full benefits they’re entitled to.

The corporations’ last hope was double down on threat to leave the state and hope a California appeals court would grant them an extension to stage another legal fight, or just comply with AB5… which is exactly what happened on Thursday afternoon.

This break gives Uber and Lyft until 5 p.m. (PT) on Tuesday to craft written statements agreeing to expedited procedures stated in the order and explaining in detail how and when they’ll achieve compliance. However, based on their corporate rhetoric, we don’t think that’s their ultimate goal. Both companies have brought up how a large portion of drivers oppose having set schedules and would prefer to work as part-time contractors, even if that means they’re not entitled to benefits. This is undoubtedly true for a subset of workers, as many drive as a secondary job, but there’s also been an ongoing push within the community to grant contractors benefits and better pay.

While Lyft said it would have to abandon its California operations without the extension, Uber had not announced any official decision to suspend service prior to the order — though it was heavily hinted at. Both will be staying put in California now that they’ve gotten their extension, however.

“We are glad that the Court of Appeals recognized the important questions raised in this case, and that access to these critical services won’t be cut off while we continue to advocate for drivers’ ability to work with the freedom they want,” an Uber spokesperson said in response to the extension.

The extensions have several stipulations, with one of the biggest being the requirement of CEOs to submit sworn statements by September 4th confirming plans to comply with the preliminary injunction within 30 days of a ruling if the appeals court affirms the preliminary injunction and if Proposition 22 (the ballot measure that would exempt the firms from AB5 entirely) fails to pass. The ride hailing firms undoubtedly hope that it will, and have asked supporters to back Prop 22 in order to continue operations as normal.

Another possible alternative would be to simply make sure Uber/Lyft drivers can be classified as truly independent. Yet we don’t think this is feasible under the current business models. For starters, the companies would effectively have to prove drivers were supplemental to salaried and hourly employees and effectively give them total freedom in the negotiation of fare rates. Neither of those outcomes seem particularly likely, and both occurring together sounds next to impossible.

The companies seem more likely to just wait an see how things shake out with Prop 22. Assuming Uber and Lyft file the applicable documents at the proper time, California officials will have to issue a response by September 18th. From there, there will be a few weeks for everyone to prepare for their court appearances on October 13th. During this time, the firms will also be engaged with a suit from the California Labor Commissioner alleging they illegally denied wages to their workers by misidentifying them.

Their last-ditch effort to avoid compliance will likely be to lobby the U.S. Congress for favorable treatment. Considering their sizable financial backing, we’d be shocked if they weren’t already engaging in this.

However, if voters support Prop 22 and it passes then all of this goes away for the ride-hailing giants. Literally every ruling against them will simply evaporate and they can continue operations as they always have. Though it is likely that California drivers would be entitled to a handful of benefits and a minimum earnings quota tied to hour wages.

[Image: Jonathan Weiss/Shutterstock]