A California state judge blocked an order requiring Uber and Lyft to classify drivers as employees, averting an expected shutdown of the ride-sharing services in California at the 11th hour, according to reporters from the Financial Times and The New York Times. The court granted Uber and Lyft a temporary stay while the appeals process play out.
Lyft had already announced it was planning to temporarily cease operations in the state earlier today, and Uber CEO Dara Khosrowshahi had said the same about his company in an interview yesterday.
Uber and Lyft are under enormous pressure to fundamentally alter their business models in California, the state where both companies were founded and raised billions of dollars in venture capital. Uber and Lyft say drivers prefer the flexibility of working as freelancers, while labor unions and elected officials contend this deprives them of traditional benefits like health insurance and workers’ compensation.
In January, a new law went into effect called AB5, which makes it more difficult for companies to use independent contractors. The law was mostly targeted at ride-sharing companies like Uber and Lyft, which have built their businesses on the concept of independent contractors shouldering the costs of their work.