Lyft announced it will halt its ride-sharing service in California on Thursday in response to a state law that requires them to make drivers employees instead of independent contractors.
“This is not something we wanted to do, as we know millions of Californians depend on Lyft for daily, essential trips,” Lyft said in a statement, which follows a California court ruling that requires Lyft and Uber to classify drivers as employees.
One of the changes introduced by AB 5 is to force companies to reclassify workers as employees if the worker’s tasks are part of the company’s core business. Uber and Lyft have argued that they are exempt from the law because their core business is technology, not ride-hailing. The companies said the changes would be expensive, logistically challenging, and lead to reduced service in communities already suffering from fewer transport options.
“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),” Lyft said, adding that 80 percent of its drivers would lose work, while the rest would lose flexibility in setting their shifts, and would have their hourly earnings capped.
“What Sacramento politicians are pushing is an employment model that 4 out of 5 drivers don’t support,” Lyft said in the statement. “This change would also necessitate an overhaul of the entire business model—it’s not a switch that can be flipped overnight.”
Some lawmakers and labor advocates say the law is good for drivers, arguing that by working as independent contractors, they lose out on basic workplace benefits like wage protections, healthcare, and paid holidays.
Following Schulman’s decision, Uber and Lyft executives warned they would shut down operations in California if they are forced to comply with AB5. So far, only Lyft has announced a suspension, with Uber widely expected to follow suit.
“As the Republican and Democratic mayors of two of California’s largest cities, we’re calling for solutions so our state doesn’t shut down an industry that’s vital to the income and livelihood of millions,” they said in a statement.
The two mayors said a stay would give the companies time to work with state leaders to negotiate a solution to what they said was a “complex issue.” Such an approach, they argued, might also lead to a “national model for enabling gig workers to thrive in the innovation economy,” while avoiding “irreparable harm upon hundreds of thousands of residents whose lives and livelihoods daily depend on these services.”
