Uber may shut down its app in California for “several months” if the company has to classify drivers as independent workers.
Following a preliminary injunction granted on Monday that requires Uber and Lyft to stop classifying their drivers in California as contractors instead of employees by next week, Uber CEO Dara Khosrowshahi, said that the app would have to be shut down there as a result.
“If the court doesn’t reconsider, then in California, it’s hard to believe we’ll be able to switch our model to full-time employment quickly,” Khosrowshahi said during a Wednesday interview on MSNBC.
The two companies have one week to appeal the preliminary injunction, which both have said they plan to do, according to CNBC. The new order would require Uber and Lyft to treat their California drivers as employees, including providing benefits and insurance.
The preliminary injunction resulted from a lawsuit California Attorney General Xavier Becerra filed against the ridesharing apps in May over their alleged misclassification of their workers as independent contractors instead of as employees. The lawsuit seeks up to $2,500 for each violation, and a permanent halt to misclassifying drivers and civil penalties that could reach up to the hundreds of millions of dollars.
Last September, a new gig economy law called Assembly Bill 5 was passed in California that requires app-based companies to treat their contractors the same way they treat regular employees. Under the new law, contractors are eligible for basic protections like minimum-wage requirements, health benefits, and Social Security.
Both Uber and Lyft have been vocal about their opposition to the bill, and even joined forces with DoorDash in August 2019 on a $90 million ballot initiative to exempt them from Assembly Bill 5. Assembly Bill 5 officially went into law on January 1.
Digital Trends reached out to Uber to comment on Khosrowshahi’s interview. We also reached out to Lyft to see if it would also shut down its app in California. We will update this story when we hear back.
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