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Lyft, Uber Soar After California Court Grants 11th Hour Delay In Converting Drivers To Employees

Courtesy of ZeroHedge View original post here.

Update: with Lyft set to suspend ridesharing operations in California at midnight tonight, a reprieve of sorts appeared in the 11th hour, when moments ago a California Court granted Uber and Lyft a delay on the order converting drivers to employees, which means that Uber and Lyft can continue operating as is while they appeal the judge's order. It is unclear how long of a delay will continue, although the appeals process could take more than a year..

The decision is a big reprieve for the ride-hailing companies, whose leaders said they might need to temporarily shut down in their home state if forced on short notice to provide drivers with costly benefits including health insurance and overtime.

The delay buys time for the companies as they campaign for a ballot measure set for a statewide vote in November that would free app-based transportation and delivery companies from the sweeping requirements of the law known as Assembly Bill 5.

As BLoomberg notes, "the delay buys time for the companies as they campaign for a ballot measure set for a statewide vote in November that would free app-based transportation and delivery companies from the sweeping requirements of the law known as Assembly Bill 5."

Proposition 22 exempts the companies from paying for full benefits that employees currently get under California law, such as unemployment insurance and complete workers compensation, while requiring them to pay 120% of minimum wage, health care contributions and medical and disability coverage, among others.

In light of this development it likely means that Lyft will continue operating on Friday, even though a full court victory appears unlikely. For now however, the market is rejoicing sending both Uber and Lyft stocks surging.

* * *

Lyft has decided to suspend its ridesharing operations in California beginning tonight at 11:59 pm PT.

"We don’t want to suspend operations," Lyft wrote in a blog post.

"We are going to keep up the fight for a benefits model that works for all drivers and our riders."

This decision follows a judge's ruling forcing both Uber and Lyft to reclassify their drivers as employees beginning Friday. In response, both Uber and Lyft previously said they would be forced to temporarily pause operations in California.

Full blog post below:

At 11:59PM PT today our rideshare operations in California will be suspended. This is not something we wanted to do, as we know millions of Californians depend on Lyft for daily, essential trips. We’re personally reaching out to riders and drivers to share more about why this is happening, what you can do about it, and to provide some transportation alternatives.

Why this is happening

For multiple years, we’ve been advocating for a path to offer benefits to drivers who use the Lyft platform — including a minimum earnings guarantee and a healthcare subsidy — while maintaining the flexibility and control that independent contractors enjoy. This is something drivers have told us over and over again that they want. 

Instead, what Sacramento politicians are pushing is an employment model that 4 out of 5 drivers don’t support. This change would also necessitate an overhaul of the entire business model — it’s not a switch that can be flipped overnight. 

In this new model that politicians are pushing:

  • Passengers would experience reduced service, especially in suburban and rural areas

  • 80% of drivers would lose work and the rest would have scheduled shifts, and capped hourly earnings.

  • Lower-income riders trying to make it to essential jobs and medical appointments would be faced with unaffordable prices (38% of Lyft rides in California begin or end in low-income areas that have few transit options already).

What we’re doing

We don’t want to suspend operations. We are going to keep up the fight for a benefits model that works for all drivers and our riders. We’ve spent hundreds of hours meeting with policymakers and labor leaders to craft an alternative proposal for drivers that includes a minimum earnings guarantee, mileage reimbursement, a health care subsidy, and occupational accident insurance, without the negative consequences.

What you can do

Your voice can help. A ballot measure this November, Prop 22, proposes the necessary changes to give drivers benefits and flexibility, while maintaining the rideshare model that helps you get where you need to go. We believe voters should decide. Please sign up to help today. 

This sent LYFT shares tumbling….

Uber CEO Dara Khosrowshahi said on a podcast that the company can't simply hire all 50,000 of its drivers overnight." data-reactid="30" type="text">And Uber is likely right behind since CEO Dara Khosrowshahi said yesterday on a podcast that the company can't simply hire all 50,000 of its drivers overnight.

on a Vox Media podcast yesterday. "You can’t flip that stuff overnight. It’ll take time, and we will figure out a way to be in California. We want to be in California. But if the court case comes in, then we’ll have to shut down, and we’ve got the best engineers in the world figuring out how we can rebuild this thing. If we do have to go to employment model, what’s going to happen is that we will then have to underwrite driver productivity. There will be far fewer drivers employed, so my guess is 70-80% of users who use Uber for flexibility, they drove 5 to 10 hours, etc., they will not be able to earn. The prices are going to go up. They’re going to go up less in city centers. So I think SF prices will go up by 20%. Smaller cities prices will go way up."" data-reactid="31" type="text">"All of our model, everything that we have built is based on this platform that brings earners and brings people who want transportation or delivery together," he said on a Vox Media podcast yesterday.

on a Vox Media podcast yesterday. "You can’t flip that stuff overnight. It’ll take time, and we will figure out a way to be in California. We want to be in California. But if the court case comes in, then we’ll have to shut down, and we’ve got the best engineers in the world figuring out how we can rebuild this thing. If we do have to go to employment model, what’s going to happen is that we will then have to underwrite driver productivity. There will be far fewer drivers employed, so my guess is 70-80% of users who use Uber for flexibility, they drove 5 to 10 hours, etc., they will not be able to earn. The prices are going to go up. They’re going to go up less in city centers. So I think SF prices will go up by 20%. Smaller cities prices will go way up."" data-reactid="31" type="text">"You can’t flip that stuff overnight. It’ll take time, and we will figure out a way to be in California. We want to be in California. But if the court case comes in, then we’ll have to shut down, and we’ve got the best engineers in the world figuring out how we can rebuild this thing. If we do have to go to employment model, what’s going to happen is that we will then have to underwrite driver productivity. There will be far fewer drivers employed, so my guess is 70-80% of users who use Uber for flexibility, they drove 5 to 10 hours, etc., they will not be able to earn. The prices are going to go up. They’re going to go up less in city centers. So I think SF prices will go up by 20%. Smaller cities prices will go way up."

So how did that work out for you California legislators? Still, 50,000 people without their ability to earn (and prices rising, affecting the poorest most) is likely outweighed by your virtue-signaling, right?


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