Uber and Lyft say that unless a state appeals court decides to intervene Thursday, they will shut down their passenger services across California for at least several months if not more than a year.
The companies say it is practically impossible for them to comply with a San Francisco judge’s order last week that said they had violated a new state law known as AB5 and had misclassified hundreds of thousands of their drivers as contractors rather than employees.
San Francisco County Superior Court Judge Ethan Schulman foundan “overwhelming likelihood” that Uber and Lyft had misclassified their drivers. He issued a preliminary injunction ordering the companies to halt the practice, which saves the companies millions of dollars a year because they do not have to pay into benefits programs, including unemployment insurance and workers’ compensation.
The mayors of San Jose and San Diego issued a statement Wednesday asking the 1st District Court of Appeal to put the injunction on hold because a shutdown would “deepen economic pain felt in our communities during this historic pandemic and recession.”
Schulman had already put enforcement of the ruling on hold for 10 days pending appeal, which ends Thursday at 11:59 p.m. It remains unknown when or whether the appeals court would rule before the clock expires.
Uber did not respond to emailed questions Wednesday afternoon. Lyft declined to comment for attribution.
Schulman’s ruling is the latest twist in a lawsuit filed three months ago by California Attorney General Xavier Becerra and city attorneys from San Francisco, Los Angeles and San Diego.
On Wednesday morning, San Jose Mayor Sam Liccardo and San Diego Mayor Kevin Faulconer largely agreed with changes to AB5 that align with what Uber and Lyft have already proposed.
“The vast majority of drivers want to stay independent workers and are looking for solutions that protect their independence while also providing additional benefit,” they wrote.
The mayors did not mention it outright, but they alluded to a proposed law that will be go before California voters in November, known as Proposition 22. It would grant a vast exemption to AB5 for Uber, Lyft and other similar gig economy companies, including DoorDash. The three companies have contributed the overwhelming majority of funding for the largest lobbying group behind Proposition 22.
Uber has threatened to pull out of an area before to pressure politicians who do not bend to its will. In May 2017, the companies restored service in Austin, Texas, after having been absent from the capital city for over a year.
The dispute centered on whether a city could impose extra requirements, such as fingerprinting and background checks, above and beyond what the state mandated. When the state Legislature passed a law establishing that municipalities could not do so, it paved the way for Uber and Lyft to return.
Since Schulman’s ruling last week, attorneys for both sides have filed dueling sets of briefs that are now before the appellate court.
Government lawyers wrote in their filing Wednesday that the ride-hailing companies have engaged in “unlawful behavior” for years. In their filings, attorneys for Uber and Lyft said Schulman’s ruling requires them to “upend” their entire business model and move drivers to less flexible working schedules.
Government lawyers claim that Uber and Lyft are choosing to shut down to make vast changes in their business model, which they said was a deliberate decision not ordered by the court.
“They can stop the unlawful activities altogether, or they can choose to adjust their practices to comply with the law,” the attorneys wrote. “The fact that it may be difficult for Petitioners quickly to adjust their business operations does not alter the nature of the injunction requiring them to stop violating the law, nor does it allow them to profit inequitably from their unlawful status quo.”