Uber and Lyft might shut down in California after court loss
posted Friday Aug 14, 2020 by Scott Ertz
In September of 2019, California passed a law requiring changes to the operations of gig economy companies, specifically Uber and Lyft. The ultimate goal of the law was to force these companies to treat their contractors as employees. The end result would be a change in the entire way these companies work and the way that their contractors work. Despite the major change in the companies' business models, Uber and Lyft made changes in an attempt to come into compliance with Assembly Bill 5.
On Monday, San Francisco Superior Court Judge Ethan Schulman ruled that the companies had violated Assembly Bill 5, even with the changes that were made. He also placed a deadline of August 20, 2020, for the companies to appeal the ruling, which is also the deadline for the companies to come into compliance. He later rules that there was no reason to extend his initial August 20, 2020 deadline.
In addition to working on an appeal, the companies have also stated that, if the rules are enforced, they will likely need to suspend operations in the state. That suspension would be in place until the residents of California get a chance to vote on Proposition 22 in November, which would override the Assembly Bill 5. This proposition would allow gig companies, such as Uber and Lyft, to maintain the contractor designation while adding some benefits. If Prop 22 is voted down, it could be the end of the gig economy in California.
This case could potentially decide the future of the gig economy. If California charges ahead with the demands, these companies will have to decide whether to change the fundamental structure of their businesses, or shut down operations in areas with these rules. We could see a similar exit to Google News leaving Spain over laws specifically targeting them. For Lyft, this would represent about 16% of the total rides.
