Uber CEO, Dara Khosrowshahi says the company could shut down its operations in California if it is forced to classify drivers as employees. Khorowshahi said the company could pull out of one of its largest markets in the US whilst speaking to MSNBC.
A California court judge ordered both Uber and Lyft to classify their drivers as employees previously. The bone of contention is that both companies classify ride-hailing drivers as independent contractors. The two companies say they will appeal the ruling.
Uber and Lyft argue that the majority of their drivers prefer to be classed as contractors. They cite the flexibility and ability of the drivers to set their own hours as reasons for the preference. However, labour unions and state officials say that this classification deprives them of employee benefits.
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If the companies classify the drivers as employees, they would have to pay them minimum wage. They will also have other entitlements like overtime compensation, paid rest periods, and reimbursements for the cost of driving for the companies, including personal vehicle mileage.
If its appeal fails, Uber may shutdown in California because of an inability to switch models quickly enough.
“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 told MSNBC.
In the appeal motion it filed on Monday, Uber states; “Because Uber will almost certainly need to shut down the Rides app while it builds these departments and systems, millions of drivers who use the app to earn vital income will likely lose that opportunity the day the injunction goes into effect—and that source of income will be lost for months, at least.”
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