REGION — San Diego Mayor Kevin Faulconer and San Jose Mayor Sam Liccardo got their wish today when an appeals court put on hold a ruling requiring Uber and Lyft to classify their drivers as employees instead of
independent contractors, staving off a possible shutdown of the ride-hailing services.
The decision by the state’s 1st District Court of Appeal averted threats by Uber and Lyft to shutter all California operations at midnight. Uber officials said earlier this week they would likely shut down, and Lyft issued a statement earlier Thursday saying its operations would be halting at midnight.
The dispute traces its roots to the state’s passage of Assembly Bill 5, which effectively required the companies to classify their drivers as employees, a move supporters said would guarantee their wages and assure them of other benefits and workplace protections.
The companies, however, said the move would require a complete overhaul of their operations and would actually hurt drivers — forcing them to work set schedules instead of giving them the flexibility to work only when they wanted. The companies also said the move would result in many drivers losing their jobs unless they could work standard hours, and would likely also harm overall service for riders.
California Attorney General Xavier Becerra, and the city attorneys of San Diego, Los Angeles and San Francisco argued in court that Uber and Lyft have misclassified their drivers as independent contractors, preventing them from receiving “the compensation and benefits they have earned through the dignity of their labor” such as the right to minimum wage, sick leave, unemployment insurance and workers’ compensation benefits.
On Aug. 10, San Francisco-based Judge Ethan P. Schulman ruled against the companies, but he stayed his decision for 10 days to give them time to appeal. They did so, resulting in Thursday’s last-minute ruling putting Schulman’s ruling on hold.
Faulconer and Liccardo’s issued a joint statement Wednesday calling for a stay on the injunction, citing economic impacts to California’s gig workers, and a loss of transportation options and delivery services for critical resources like food and medical care for California residents.
“This sudden disappearance of jobs and transportation options will only deepen the economic pain felt in our communities during this historic pandemic and recession,” the statement read.
The mayors said a stay could allow state leaders and the companies time to craft “a resolution to this complex issue and avoid irreparable harm upon hundreds of thousands of residents whose lives and livelihoods daily depend on these services.”
Faulconer and Liccardo also proposed the creation of a portable benefit fund for independent contractors that the companies would be required to pay into.
“Being forced into a situation where shutting down service is the only viable option hurts everyone at a moment when we need to pull together to help more Californians make ends meet,” the mayors said. “We call on all parties to turn this political standoff into a foundation for productive conversation about new ways to preserve a valued service and fairly compensate independent workers. California can choose to continue to implement solutions that lead the innovation economy, or to be led by others. The livelihoods of nearly one million residents depends on California choosing to lead.”
The appeals court warned the companies to continue preparing for the possible switch to employee drivers, saying each company must submit a sworn statement by Sept. 4 “confirming that it has developed implementation plans.”
The companies must also affirm they are prepared to actually implement those plans and switch to the employee system within 30 days if they ultimately lose their appeal and a company-sponsored measure on the November ballot fails.
That ballot measure, Proposition 22, would allow ride-hailing drivers to work as independent contractors.
The court scheduled oral arguments in the appeal for Oct. 13.
Lyft contends that four out of five drivers prefer working as independent contractors so they can have more flexibility.