Calif. Appeals Court Grants Uber, Lyft Temporary Emergency Stay After Shutdown Threats

On Thursday, a California Court of Appeals granted Uber and Lyft a temporary emergency stay, while their appeal continues, extending the amount of time the companies have to comply with an order requiring them to reclassify their drivers as employees instead of independent contractors in compliance with California Assembly Bill 5 (AB-5).

Uber and Lyft previously threatened to shut down in California following the required classification, but after the court’s temporary relief to the companies, both Uber and Lyft stated they would continue operating in California. The reprieve was given hours before the Lyft was set to shut down at midnight PT. 

California’s AB-5 went into effect on January 1 and it requires gig workers to be reclassified as employees, not independent contractors. The temporary reprieve gives the ride-sharing companies until 5 p.m. on Tuesday to file written statements agreeing to a new timeline and procedures so the stay can extend until the appeals are resolved. The CEOs of the companies must submit sworn statements before Sept. 4 stating that they have developed plans to comply with the preliminary injunction within 30 days of a court of appeals ruling if the court affirms the preliminary injunction and if the Proposition 22 ballot measure fails to pass. The companies will also have until October to persuade the court to toss the order classifying their drivers as employees.

Uber and Lyft are also hoping a ballot measure, Proposition 22, in the upcoming November election excuses them from having to comply with AB-5. The proposition would provide more benefits to drivers, such as minimum wage and health insurance, but some argue these benefits are less than what drivers would be afforded if they are employees.

Uber celebrated the temporary reprieve; an Uber spokesperson stated, “we are glad that the Court of Appeals recognized the important questions raised in this case, and that access to these critical services won’t be cut off while we continue to advocate for drivers’ ability to work with the freedom they want.” Lyft was also pleased with the court’s ruling, but felt Proposition 22 is the way to go. A Lyft spokesperson stated, “while we won’t have to suspend operations tonight, we do need to continue fighting for independence plus benefits for drivers.”

California Attorney General Xavier Becerra and the city attorneys of Los Angeles, San Francisco, and San Diego sued Uber and Lyft in May over their alleged driver misclassification. Later, they filed a motion for preliminary injunction to compel the companies to reclassify the drivers as employees immediately.

Judge Ethan Schulman granted this preliminary injunction, finding that Uber and Lyft failed the required three-prong ABC test. Uber and Lyft are at odds with their current business models and the possibility that they may have to change. Specifically, Uber and Lyft argue that drivers prefer the flexibility of being an independent contractor and that they are not subject to AB-5 because they are technology companies not employers or transportation companies. Government officials and labor unions asserted the companies rob drivers out of traditional employee benefits, such as health insurance and paid overtime.

“We’re confident in the facts of our case and look forward to continuing our fight to defend the rights of workers,” a spokesperson for Calif. Attorney General Becerra said.