Uber, Lyft threaten California shutdown over driver status

BERKELEY, Calif. (AP) — Ride-hailing giants Uber and Lyft are saying they will shut down their California operations if a new law goes into effect overnight that would force both companies to classify their drivers as employees.

Lyft told riders and drivers Thursday that it plans to discontinue providing rides in California just before midnight tonight, unless a court grants a stay in a pending case.

Barring a last-minute reprieve from the appeals court, the shutdown would be a major blow to two companies that still haven't proven they can make money, even as they have held down their expenses by treating drivers as independent contractors who don't receive the same benefits as their full-time employees.

California represents a substantial chunk of both companies’ businesses. It accounted for 9% of Uber's worldwide rides before the pandemic caused people to avoid traveling. The state is even more important to Lyft, which doesn't operate outside of the U.S. besides Canada. California accounted for 21% of Lyft's rides before the pandemic.

At issue is a decision that could re-shape the so-called gig economy as drivers, delivery workers and others who work for popular apps on an as-needed basis seek improved working conditions and benefits that many in the workforce enjoy.

Both companies are hoping for a stay of an earlier court decision that ruled they must start treating their drivers as employees, not independent contractors, by Friday morning. Both appealed and sought a stay on the decision until the case makes its way through the court, and they're waiting to see if that's granted.

The San Francisco-based companies said it would be impossible to convert hundreds of thousands of drivers from independent contractors into full-fledged employees overnight.

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