Uber, as well as rival Lift, can appeal next week to a California court ruling ruling that companies ban companies from branding and classifying drivers as freelancers. The ruling means that companies will be required to set aside insurance money for employees and provide them with additional benefits.
The lawsuit was filed by California Attorney General along with the plaintiffs of three cities and is based on a new law approved by the state, Assembly Bill 5 that aims to provide benefits and welfare to employees of the gig economy by defining them as employees. The judge issued a temporary injunction on the matter. He rejected the claim that drivers should be treated outside the company’s own business. According to him, this claim is a “classic example of circular justification.”
Uber and Lift have already announced that they intend to file an appeal. They have a 10-day window to do so before the decision takes effect.
Kosrashahi proposes a “third way” in which drivers will remain independent but companies will provide them with certain protections without being classified as employees. In an opinion piece published in the New York Times before the ruling, Kosrashahi argued that companies like Uber and Lift could transfer funds to a fund from which they would pay drivers for days off and health insurance, based on their number of weekly work hours.
However, Kosrashahi stressed that his alternative plan in case Uber did not win the appeal would be to temporarily suspend operations in California. He stressed that Uber would later return to activity in the country, but noted that this would most likely only happen in cities. That is, the service will be limited to less crowded areas like the suburbs.
If the appeal is rejected, Bauer will let voters decide her fate. According to Kosrashahi, in the event of a loss in the California activity activity resident until November then elections will be held and voters in the state will also be asked to vote for or against Proposition 22, which would exempt travel sharing app drivers and courier companies from being considered employees. Bauer insists that drivers themselves prefer the current situation in which they are defined as independent. However, Javier Basra, the California Attorney General, dismissed the claim, saying it was a “false argument.”
Kosrashahi, on the other hand, stressed that the cessation of operations in California would leave thousands of drivers without a source of income. The corona crisis has led to a decline in the number of trips booked, so that according to the judge the ruling was made in the “least bad time” for the companies in terms of adjustments to be made to their business models.
Basra said in response in an interview with CNBC that he was not bothered by the possibility that Uber would cease operations because of the ruling. “A business model that is based on cheating employees to be successful probably should not operate anywhere, neither in California nor anywhere else,” he said.