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Uber Might Temporarily End Service In California Over Law Classifying Drivers As Employees, CEO Says

Uber CEO Dara Khosrowshahi suggested Wednesday that the ride-sharing app will likely close down for several months in California if a court doesn’t overturn a ruling that changes the classification of the company’s drivers to full-time 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,” Khosrowshahi said in an interview with CNBC. The Uber executive was referring to a Monday preliminary injunction in which a judge prohibited Uber and Lyft from classifying drivers as independent workers.

Both companies would be required to provide benefits and unemployment insurance for workers under the injunction, CNBC reported.

California Attorney General Xavier sued the companies under Assembly Bill 5, which aims to provide benefits to gig workers by labeling them employees rather than independent contractors. Khosrowshahi suggested in a New York Times editorial Monday that the company could provide drivers’ independence while also giving workers a chance to collect benefits.

Uber, Lyft, and other ride-sharing apps, could put money into a fund that workers could use to pay for healthcare benefits, or paid time off, which can be based on the number of hours they work, Khosrowshahi wrote. California’s law requiring gig companies to pay all contractors as if they are employees will increase costs for customers and reduce the number of rides people can take, he argued.

“Uber would only have full-time jobs for a small fraction of our current drivers and only be able to operate in many fewer cities than today,” Khosrowshahi noted, citing a Medium post in May from Uber economist Alison Stein in which she fleshes out the company’s business model.

“Rides would be more expensive, which would significantly reduce the number of rides people could take and, in turn, the number of drivers needed to provide those trips,” Khosrowshahi argued. “Uber would not be as widely available to riders, and drivers would lose the flexibility they have today if they became employees.”

The service would shut down in California until November, when voters in the state decide the fate of Proposition 22, which exempts drivers for app-based transportation from being considered employees. Uber argues drivers prefer working as independent contractors, CNBC reported.

Becerra, a Democrat, rejected that claim during a CNBC interview Tuesday.

“What worker doesn’t want to have access to paid sick leave?” Becerra asked. “What worker doesn’t want to have unemployment insurance at a time of Covid-19 crisis? What worker doesn’t want to know that they’ll get paid for overtime if they work 60 hours in a week or 12 hours in a day?”

The coronavirus pandemic has had a negative impact on Uber’s bottom-line. Bookings fell 72% from the first quarter when the pandemic first struck, The Wall Street Journal reported, citing data from the company.

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