Uber and Lyft have lost their bid to delay a preliminary injunction that will force the two ride-hailing app companies to reclassify its drivers as employees. A California superior court judge denied Thursday the companies request to delay the order from going into effect August 20.
The decision sets the stage for a legal fight and will most certainly require both companies to suspend operations temporarily in California if they fail to get the stay extended. Uber confirmed with TechCrunch it plans to file an appeal as soon as possible. Lyft said in an email that it will immediately seek a further stay from the appellate court and will file that motion by the end of this week.
On Monday, California Superior Court Judge Ethan Schulman granted a preliminary injunction forcing Uber and Lyft to reclassify its drivers as employees. This order is set to go into effect August 20. The judge acknowledged that the order would change the nature of Uber and Lyft’s business practices in “significant ways” and implementing the injunction would be “costly.” However, those hardships weren’t enough to sway the court from classifying drivers as employees, a decision that would force Uber and Lyft to provide unemployment insurance and other benefits.
California Attorney General Xavier Becerra, along with city attorneys from Los Angeles, San Diego and San Francisco, brought the lawsuit against Uber and Lyft to force the companies to comply with AB 5.
Uber’s attorneys requested in its motion that an injunction should be stayed while the Court of Appeals makes its decision over whether the ruling should stand. The attorneys argued that “Uber will almost certainly be forced to shut off the Rides platform in California if the injunction goes into effect, which would irreparably harm Uber and all who rely on its Rides app to generate income for them and their families — particularly in the midst of a pandemic.”
Both companies have made comments this week that if the stay isn’t extended, operations will need to be suspended. It could lead to a more dramatic move — at least from Uber, which has threatened to leave California for good.
As this legal wrangling plays out, Uber and Lyft are also aiming to build support for Prop 22, a measure that voters will have a chance to approve or reject in the November elections.
Prop 22 would require companies like Uber and Lyft to provide a number of protections laid out in AB 5. The measure says drivers must receive an earnings guarantee of at least 120% of minimum wage while on the job, 30 cents per mile for expenses, a healthcare stipend, occupational accident insurance for on-the-job injuries, protection against discrimination and sexual harassment and automobile accident and liability insurance.
There is one key difference that makes it appealing to Uber and Lyft: Prop 22 would keep drivers classified as independent contractors.