08.17.20 - Uber and Lyft, the ride hailing giants, are being confronted with a heated legal battle in the state of California over a recent law dictaing how the on-demand economy classifies its workers.
Both companies have said they could suspend their operations in the state as soon as this week. A referendum, which is being pushed by the two companies, is slated to be voted on in November to decide whether Uber and Lyft should be exempt from this new law (called AB-5). Many analysts have pointed out that Uber and Lyft’s ridership has dropped significantly in the state in recent months.
"If a tree falls in the forest and no one's there to hear it, then did it really happen? If voters couldn't get an Uber or a Lyft when they wanted it, that's one thing. But ridership is down so drastically, if this does prompt a political outcry, it'll come from the drivers, not the riders", said Bradley Tusk, a former regulatory adviser to Uber.
About a week ago, the state of California court ordered Uber and Lyft to reclassify their drivers as employees in 10 days. This presents a direct threat to the business model of the two companies. Both have accumulated massive fleets of drivers by labeling them as independent contractors, making them ineligible for employee benefits. The date of the referendum is November 3rd.
Source: San Francisco Chronicle