Lyft said it would cease operations in California if drivers were to be classified as employees, company executives said in a call for earnings with investors on Wednesday. Lyft has threatened Uber with pulling out of one of its key U.S. markets over driver employment status.
It’s about classifying drivers as independent contractors, which Uber and Lyft say are preferred by most drivers for flexibility and the ability to set their own hours. However, unions and elected officials claim that this deprives them of traditional benefits such as health insurance and workers’ compensation. Earlier this week, Uber and Lyft were ordered by a California judge to classify their drivers as employees. Both companies have announced that they will appeal the ruling, which has been suspended for 1
But if their appeals fail, Lyft, along with Uber, could close the California deal, said company president John Zimmer. “If our efforts here are unsuccessful, we would be forced to cease operations in California,” Zimmer said in a call announcing the results for the second quarter of 2020. ”
Uber and Lyft are partnering with DoorDash to fund an elective, Proposition 22, that would override AB5 by making hail drivers and other gig economy workers independent contractors. The Elective Action is Plan B for companies when their efforts to overcome the state’s legal challenges fail.
If drivers were classified as employees, Uber and Lyft would be responsible for paying them minimum wages, overtime pay, paid rest, and reimbursements for corporate travel expenses, including personal vehicle mileage. However, as independent contractors, drivers do not receive any of these benefits.
Lyft’s earnings report was grim as the COVID-19 shutdown continued to depress demand for app-based ride hail. The company had revenue of $ 339 million for the second quarter, a decrease of 61 percent from the same period last year. Lyft’s active driver count also decreased 60 percent to 8.7 million active users this quarter, compared to 21.8 million a year earlier.
Lyft lost less money this quarter than last year because it did less travel. Lyft’s net loss for the second quarter was $ 437.1 million, compared to $ 644.2 million for the same period last year.
The company earns money with hail trips, bike and scooter rides, and renting out new vehicles. Unlike Uber, Lyft doesn’t have a full-fledged grocery and grocery delivery store to fall back on when its core hailstones business drops.