Uber claims it may have to temporarily shut down in California after a judge ruled earlier this week that Uber and Lyft must classify their gig drivers as employees.
“If the court doesn’t reconsider, then in California, it’s hard to believe we’ll be able to switch our model to full-time employment quickly,” Uber CEO Dara Khosrowshahi said in an interview Wednesday on MSNBC.
“We will have to shut down until November,” he said, adding that a re-imagined version of Uber in California would result in “much smaller service, much higher prices.”
On Monday, Judge Ethan Schulman of the San Francisco County Superior Court ruled there was an “overwhelming likelihood” that both Uber and Lyft misclassified drivers as contractors rather than employees. The ruling represents a significant legal setback for the two companies, which have been fighting a new California law that entitles its armies of drivers to the valuable benefits and perks that come with employee status
Judge Schulman has put a ten-day hold on his ruling, giving time for the defendants to appeal the decision.
California Attorney General Xavier Becerra (D) brought the lawsuit against Uber and Lyft for failing to comply with the new law, previously known as AB5, which took effect in January. Uber has been vocal about its intention to flout the law, which it has claimed deprives drivers of the flexibility of being independent contractors.
Becerra told CNBC on Tuesday that he wasn’t worried about the potential for Uber to leave California.
“Any business model that relies on shortchanging workers in order to make it probably shouldn’t be anywhere, whether California or otherwise,” he said.
Uber CEO Khosrowshahi said Wednesday on MSNBC that if Uber can’t win on appeal, the company would move to temporarily pause service in California until November. He said Uber would eventually resume service in the state, but in a limited capacity focused more on major cities.
Khosrowshahi is pinning his hopes on California Proposition 22, which would exempt drivers from being treated as employees. The proposition will be on the state ballot in November.