Lyft announced it will cease operations in California effective midnight Friday. Lyft photo
Written by Donald A. Promnitz and Edward Smith
UPDATE: An appeals judge Thursday issued a stay on orders to treat drivers as employees until the case is heard in court. Following this, Lyft has rescinded its decision to suspend driving services “for now,” according to an announcement on their website.
Here is the original story:
Beginning Friday morning at midnight, rideshare company Lyft announced it would be suspending driver services in California following a judicial ruling classifying drivers as employees.
This means that all operations for the San Francisco-based company would cease in their home state, according to an announcement on the website.
The move comes after a ruling in San Francisco Superior Court last week that ordered both Uber and Lyft to treat its 325,000 drivers in the Golden State as employees and guarantee overtime, sick leave and expense reimbursement benefits. California Attorney General Xavier Becerra as well as city attorneys from Los Angeles, San Diego and San Francisco filed the lawsuit under Assembly Bill 5, passed into law 2018.
“This would have required us to overhaul our entire business model, and it’s not a switch we can flip in such a short timeframe,” the notice on the Lyft website read.
The two ride-hailing companies are expected to appeal the decision. The order from the judge will not take effect until the appeal is heard, according to the Associated Press.
Uber has also threatened to cease operations, though company officials said they would maintain food delivery under Uber Eats. Both companies say they need time to be able to retool their business structure.
At the same time, both Lyft and Uber have pumped millions of dollars in support of Proposition 22, which would appear on the November ballot. Prop 22 would exempt ride-hailing companies from AB 5.
The news was met with mixed reaction from people in the local taxi industry who have long decried ride-sharing apps as unfair competition. The owner of one local taxi company said was pleased to hear the news, but declined to go on the record for this story.
According to Jim Reynolds, a consultant for taxi company ABC Transport Systems in Visalia, the smaller taxi services are in the same boat as businesses like Uber and Lyft, calling it a “pure attack” on gig workers by the state.
Cab drivers rely on splitting the fare with the companies and keeping tips.
However, under AB 5, even smaller companies will have to pay minimum wage and $15 an hour in workers’ comp expenses, which Reynolds says will make their business unsustainable.
“It’s impossible to make $30 an hour to recoup just him going out the door,” Reynolds said. “For some reason, the government is totally ignoring the workman’s comp factor.”