Lyft will continue service in California for the time being after a California court of appeals issued a stay on the impending California state mandate requiring the ride-hailing services to reclassify its drivers as employees.
Uber and Lyft threatened to suspend operations in California over the mandate, citing a total upheaval of their business models and high costs associated with providing benefits to employees as opposed to independent contractors.
An unsuccessful attempt to file an appeal allowing the court to stay the order failed last week when a judge sided with the state, giving the companies until Aug. 20 to make the change. Lyft announced that it would suspend operations midnight Thursday, but the new stay issued from the court of appeals means that Uber and Lyft can continue operations within California.
Last year, the state of California passed AB 5, defining independent contractors as a person “free from the control and direction of the hiring entity in connection with the performance of the work” who “performs work that is outside the usual course of the hiring entity’s business, and the person is customarily engaged in an independently established trade, occupation, or business.”
Otherwise, they are considered an employee.
California subsequently sued Lyft and Uber for violating AB 5 in May. However, the new appeal has been handed down indefinitely until the companies give their case arguments on Oct. 13.
“We are glad that the Court of Appeals 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,” said Uber spokesman Noah Edwardsen in a statement.
That fight took the form of a November ballot measure, Proposition 22, that would provide limited benefits by creating a third class of employees.
While Uber and Lyft are gaining the most headlines, other app and gig-based companies like Doordash and Instacart are pushing for Prop 22 to cut costs and maintain operations in the lucrative California market.
The Washington Post reported that these companies have already provided $110 million towards the initiative.
Uber and Lyft are looking into how they can potentially alter their business model. Including establishing franchises that would operate from a home base, similar to cab services.
For now, the companies have until the court makes a decision after their chance to argue. If the court favors California, Uber and Lyft will have 30 days to comply, unless Proposition 22 is passed during the election.