Potential Uber, Lyft suspensions loom in California as competitors brace

Top executives for the ride-hailing apps say they will be forced to rework their business around the law

Competitors to Uber and Lyft are eyeing the California market as a potential suspension to both ride-hailing companies looms over a state law that would require them to reclassify their drivers as employees rather than independent contractors.

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The California labor law, AB5, requires businesses to treat their gig workers as employees, and is meant to encourage companies to create more full-time positions.

Uber and Lyft say they will temporarily suspend their operations in California is forced to comply with a state law that compels them to classify their drivers as employees rather than independent contractors. 

Earlier this month, San Francisco Superior Court Judge Ethan Schulman granted a preliminary injunction ordering Uber and Lyft to comply with the law. Now, a stay on that injunction is set to expire at midnight Thursday. Schulman denied the ride-sharing companies’ request for an extension of the 10-day stay.

Uber and Lyft executives said they plan to appeal to a higher court. If forced to comply with the law, they may suspend their services in California while modifying their business model to accommodate it, they say.

TickerSecurityLastChangeChange %
UBERUBER TECHNOLOGIES INC.35.15-1.33-3.66%
LYFTLYFT INC.28.44-0.46-1.59%

“The court’s ruling is stayed for a minimum of 10 days, and we plan to file an immediate emergency appeal on behalf of California drivers," a spokesperson for Uber told FOX Business last week. "The vast majority of drivers want to work independently, and we’ve already made significant changes to our app to ensure that remains the case under California law. When over 3 million Californians are without a job, our elected leaders should be focused on creating work, not trying to shut down an entire industry during an economic depression.”

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Meanwhile, the prospect of Uber and Lyft temporarily leaving California has prompted several other competitors to accelerate their plans to enter the market.

Alto, a Texas-based rideshare service, told CNBC this week it had already planned to expand to California by early 2021. Now it hopes to be there by no later than November.

Even the taxi industry, which has for years complained of Uber and Lyft’s threat to its business, is poised for a comeback by picking up the apps’ customers.

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Mark Gruberg, a taxi driver and board member of the San Francisco Taxi Workers Alliance, told MarketWatch the apps’ shutdown “could be a big shot in the arm for taxis.”