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UPDATED: Lyft threatens immediate shutdown of all services in California

'What Sacramento politicians are pushing is an employment model that 4 out of 5 drivers don't support'

Smith Collection/Gado/Getty Images

Lyft announced that it was planning to suspend ride-share operations in the state of California at 11:59 p.m. on Thursday. However, a California appeals court stepped in Thursday afternoon to provide Lyft and Uber with an extension to comply with an order requiring the ride-sharing companies to classify independent contractors as employees, according to CNBC.

The last-minute reprieve averts what was drawing out to be a midnight shutdown of the ride-sharing services in California. The ride-hailing companies have until 5 p.m. PT on Aug. 25 to file written statements accepting the expedited procedures set out in the order.

The massively popular ride-sharing service based out of San Francisco had planned to cease operations Thursday night because of a state labor law that forces gig workers to be recognized as employees.

"This is not something we wanted to do, as we know millions of Californians depend on Lyft for daily, essential trips," the Lyft news release stated before the appeals court stepped in. "We're personally reaching out to riders and drivers to share more about why this is happening, what you can do about it, and to provide some transportation alternatives.

"For multiple years, we've been advocating for a path to offer benefits to drivers who use the Lyft platform — including a minimum earnings guarantee and a health care subsidy — while maintaining the flexibility and control that independent contractors enjoy," the statement said. "This is something drivers have told us over and over again that they want.

"Instead, what Sacramento politicians are pushing is an employment model that 4 out of 5 drivers don't support," the blog post continued. "This change would also necessitate an overhaul of the entire business model — it's not a switch that can be flipped overnight."

Lyft says it has "spent hundreds of hours meeting with policymakers and labor leaders to craft an alternative proposal for drivers that includes a minimum earnings guarantee, mileage reimbursement, a health care subsidy, and occupational accident insurance, without the negative consequences."

Earlier this month, Lyft and Uber threatened to cease their ride-hailing services in California. The two app-based ride-sharing companies have said they would leave the state because of Assembly Bill 5, legislation that passed last year that requires companies to treat independent contractors the same as regular employees.

Uber is also expected to suspend its operations in California by Thursday night.

There is a chance that Uber and Lyft suspend services in California, but could return in November. Proposition 22, a bill named "App-Based Drivers as Contractors and Labor Policies Initiative," would provide an exemption for ride-sharing drivers and food delivery services. Prop 22 will be on the ballot in the Nov. 3 general election.

Earlier this month, Lyft co-founder and President John Zimmer told CNBC, "If our efforts here are not successful, it would force us to suspend operations in California. Fortunately, California voters can make their voices heard by voting yes on Prop 22 in November."

Lyft, which operates in 644 cities in the United States and Puerto Rico, has 1.4 million drivers in the U.S. and Toronto, according to a 2018 CNET report. As of Oct. 1, Lyft had about 305,000 drivers in California who completed trips within the past year, according to CNBC.

In a May 28 news release, Uber estimates to have 209,000 active drivers, but warned the coronavirus pandemic could decrease that number by 76%.

Uber sent an alert to riders via its app on Wednesday that read, "Ridesharing in CA may be suspended."

On Wednesday, the official Uber Twitter account retweeted a post that said: "As bipartisan mayors of CA's 2/3 largest cities, we share serious concern for the exodus of ride-share companies statewide. This Friday, nearly 1M gig workers will lose their income in the Golden State—deepening the economic pain felt in our communities during this crisis."

Editor's Note: This story has been updated.

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