OAKLAND, Calif. – Uber and Lyft say they will cease passenger services across California for a minimum of a few months, if not more than a year, unless a state appeals court orders to intervene Thursday.
The companies say it is virtually impossible for them to obey last week's order from a judge in San Francisco that they violated a new state law called AB5 and wrongly classified hundreds of thousands of their drivers as contractors rather than employees.
San Francisco County Supreme Court Justice Ethan Schulman found an "overwhelming chance" that Uber and Lyft had misclassified their drivers. He issued a restraining order directing companies to cease the practice, saving companies millions of dollars annually from not having to pay into benefit programs like unemployment insurance and employee compensation.
The Mayors of San Jose and San Diego issued a statement Wednesday calling on the District Court of Appeals to put the injunction on hold because of a shutdown "reducing the economic pain in our communities during this historic pandemic and recession would deepen ".
Schulman had already suspended the execution of the sentence for 10 days until an appeal was filed, which ends at 11:59 p.m. Thursday. It is not known when or whether the appellate court would rule before the deadline.
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Uber didn't respond to questions asked via email on Wednesday afternoon. Lyft declined to comment on the attribution.
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Schulman's decision is the latest twist in a lawsuit filed three months ago by California Attorney General Xavier Becerra and lawyers from San Francisco, Los Angeles, and San Diego.
On Wednesday morning, San Jose Mayor Sam Liccardo and San Diego Mayor Kevin Faulconer largely approved changes to AB5 in line with what Uber and Lyft have already proposed.
"The vast majority of drivers want to remain independent workers and are looking for solutions that protect their independence while adding value," they write.
As non-partisan mayors of two thirds of the largest cities in California, we share serious concerns about the exodus of ridesharing across the state. This Friday, nearly 1 million gig workers in the Golden State will lose their incomes – adding to the economic pain in our communities during this crisis. pic.twitter.com/QFTwlkRs5k
– Sam Liccardo (@sliccardo) August 19, 2020
The mayors didn't mention it directly, but they alluded to a proposed bill to be passed before California voters in November, known as Proposition 22. It would give AB5 a sweeping exemption for Uber, Lyft, and other similar gig economy companies, including DoorDash. The three companies have allocated the vast majority of the funding to the largest lobby group behind Proposition 22.
Uber has threatened to pull out of an area to put pressure on politicians who refuse to bow to its will. In May 2017, Austin, Texas, companies restored service after being out of the capital for over a year.
The dispute centered around the question of whether a city could impose additional requirements such as fingerprints and background checks beyond what the state mandates. When state law passed a bill stating that communities couldn't do this, it paved the way for Uber and Lyft to return.
Since Schulman's decision last week, lawyers from both sides have filed duel sentences that are now before the appeals court.
Government lawyers wrote in their file filed on Wednesday that the hail-fighting firms have been engaging in "illegal behavior" for years. In their filing, lawyers from Uber and Lyft said Schulman's decision required them to "turn their entire business model upside down" and switch drivers to less flexible working hours.
Government lawyers claim Uber and Lyft decided to shut down in order to fundamentally change their business model. They said this was a deliberate decision that was not ordered by the court.
"They can stop the illegal activities altogether or adapt their practices to the law," the lawyers wrote. "The fact that petitioners can find it difficult to adapt their business quickly does not change the nature of the order requiring them to stop breaking the law, nor does it allow them to take unfair advantage of their illegal status quo."