LOS ANGELES (CBSLA) – The head of ride-sharing giant Uber Wednesday said the company could temporarily halt service in California in response to the gig worker law which took effect in January and was upheld by a judge earlier this week.
In an interview Wednesday, CEO Dara Khosrowshahi told CNBC that if the company’s court appeal fails, Uber will be forced to temporary shut down.
“If the court doesn’t reconsider, then in California, it’s hard to believe that we’ll be able to switch our model to full time employment quickly,” Khosrowshahi said. “So I think Uber will shut down for a while.”
On Monday, a federal judge ruled that Uber and Lyft must classify their drivers as employees rather than independent contractors.
The ruling was in response to a lawsuit brought by several city attorneys and California Attorney General Xavier Becerra, which alleged that the companies violated Assembly Bill 5 (AB 5) and were misclassifying drivers’ employment statuses to prevent them from receiving proper compensation and benefits.
Both Uber and Lyft said they would appeal the judge’s ruling, which is scheduled to take effect in 10 days.
Last September, the California Legislature passed the controversial AB 5, a law which requires companies who employ gig workers, such as rideshare drivers, to reclassify them as employees, affording them benefits including minimum wage, overtime and unemployment insurance.
Despite all the legal wrangling, California voters are set to decide the fate of AB 5 in less than three months when they vote on Proposition 22.
Back in May, Prop. 22, which would overturn provisions of AB 5 specifically relating to app-based drivers, qualified for the November ballot.
Under Prop. 22, instead of being categorized as employees, drivers for app-based companies would remain independent contractors but be provided with “alternative benefits,” including a guaranteed minimum level of pay and healthcare subsidies, all based on how much they drive. It would also restrict local regulation of app-based drivers, criminalize impersonation of such drivers and require background checks.
“We think we comply by the laws, but if the judge and the court finds that we’re not, and they don’t give us a stay to get to November, then we’ll have to essentially shut down Uber until November when the voters decide,” Khosrowshahi said Wednesday.