A state Court of Appeal on Thursday granted rideshare companies a temporary reprieve on an order to convert contract drivers to employees just hours after Lyft announced it would shut down in California at midnight.
The last-minute ruling, in a case with potential ripple effects across the global gig economy, effectively hands a decision over gig worker benefits and pay to voters in a November ballot measure.
The temporary reprieve by the 1st District Court of Appeal in San Francisco gives Uber and Lyft until 5 p.m. on Aug. 25 to file written statements agreeing to expedited procedures to convert drivers to employees.
The court warned the companies to continue preparing for the possible switch to employee drivers, saying each 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 within 30 days if they ultimately lose their appeal and if Proposition 22 on the November ballot fails.
Just before 10 a.m., Lyft announced that it would shut down at 11:59 p.m. Thursday due to the ongoing legal dispute.
“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,” the company said on its website. “We know that millions of people across the state depend on Lyft — from our community of drivers who earn by giving rides, to the essential workers and local residents who take those rides to work or the store — and we’re concerned about how this will impact all of them.”
Uber was also expected to shut down in California later Thursday unless the court granted a reprieve.
“We are glad that the Court of Appeal recognized the important questions raised in this case, and that access to these critical services won’t be cut off while we continue to advocate for drivers’ ability to work with the freedom they want,” an Uber spokesperson said in a statement.
The two companies had been ordered to covert their workforce from independent contractors to traditional shift employees by Friday under controversial Assembly Bill 5. The companies say the transition will take months, and previously threatened to shut down in California until after the November election, when possible passage of Proposition 22 would free them from the new law.
An Aug. 9 poll among Californians by Refield & Wilton showed 41% of voters planned to support the companies’ proposal and 26% oppose it, with the remainder still undecided.
On Wednesday, the mayors of San Diego and San Jose pleaded with the Court of Appeal to allow the two rideshare companies to continue to pay drivers and transport essential workers during the pandemic.
AB 5 was sponsored by San Diego Assemblywoman Lorena Gonzalez and backed by labor unions, which saw the law as a way to organize more workers.
Despite Thursday’s reprieve, the office of California Attorney General Xavier Becerra said it remained confident in its case and would continue its fight to defend the rights of workers.
“California is America’s economic engine because innovation and worker rights go hand in hand. Any company that suggests otherwise is peddling a false choice,” Becerra said.
Updated at 9:45 p.m., Thursday, Aug. 20, 2020