Lyft Abandons Operations in California Following Court Decision

As Uber contemplates ways to avoid having to close up shop in California following the passing Assembly Bill 5, Lyft is simply suspending operations as it waits to see how the appeals process works out.

On Thursday, the fuchsia-themed ride-hailing firm said it would not be able to maintain business as usual in the Golden State, citing several of the reasons we prognosticated in yesterday’s article about Uber mulling a franchise model. Included in the release was an inability to hire enough drivers in a manner that would appease the new law, resulting in reduced service (especially in suburban and rural areas), and a pricing increase deemed unfeasible for existing customers if implemented.

Lyft said it did not want to cease offering rides in California, adding that it is committed to fighting for a benefits model that works for all drivers and passengers, but circumstances left it with precious few alternatives, none of which seem workable at present.

From Lyft:

For multiple years, we’ve been advocating for a path to offer benefits to drivers who use the Lyft platform — including a minimum earnings guarantee and a healthcare subsidy — while maintaining the flexibility and control that independent contractors enjoy. This is something drivers have told us over and over again that they want.

Instead, what Sacramento politicians are pushing is an employment model that 4 out of 5 drivers don’t support. This change would also necessitate an overhaul of the entire business model — it’s not a switch that can be flipped overnight.

It also requested customers vote on a November ballot measure (Prop 22, also backed by Uber) that allows app-based drivers to be classified as independent contractors instead of regular employees. While plenty of drivers have bemoaned stringent regulations that would prohibit their ability to work during their free time and force them into a more traditional workday, many have advocated for fairer treatment by the companies.

Since Uber and Lyft don’t allow drivers to set their own rates, classifying them as contractors is at odds with the legal definition — even though most states haven’t offered much pushback. But Assembly Bill 5 effectively requires all companies to reclassify independent staff as employees, with few exceptions. This places a legal obligation on the ride-hailing firms to provide drivers with workers comp, unemployment, paid sick/personal leave, health insurance, and more. These are things they cannot afford, especially since neither Uber or Lyft seem capable of making money without being propped up by the stock market.

[Image: Jonathan Weiss/Shutterstock]