Lyft has announced suspending its ride-hailing service in California after a court ruling that requires it and Uber to reclassify drivers as employees. California also happens to be Lyft’s biggest largest market.
“As a result of a court order, we’ll be suspending rideshare throughout California at 11:59 PM PT on Thursday, August 20. We did everything we could to prevent this from happening and keep Lyft available for you, but it wasn’t possible to overhaul our business model and operations in ten days,” Lyft California said in an update on its website.
Judge Ethan Schulman of the San Francisco Superior Courtin his ruling ordered the ride-hailing companies to start classifying their drivers as employees in the state.
According to the ruling, they have 10 days from the judgment to appeal. Both companies have said they will challenge the ruling in the form of an appeal.
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The State of California in its suit had said that Lyft and other gig companies “exploited hundreds of thousands of California workers”. The state alleges that classifying drivers as independent contractors violate California’s AB 5 law on worker classification. A law that took effect in January 2020.
Classifying the drivers as independent contractors meant that the companies do not have to pay them minimum wage or health insurance or sick leave. Drivers also have to pay for their gas, car maintenance, and insurance. Classifying them as employees will accrue additional operating costs to the companies.
Both Lyft and Uber are also trying to fight AB5 by urging Californians to support a ballot measure called Proposition 22. Uber, Lyft, Doordash, Postmates, and Instacart are the main supporters of Proposition 22, committing about 110 million to the cause. The measure will go to the ballot on 22nd November 2020 with the intention of exempting gig companies from AB5.
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