Uber would likely shut down temporarily for several months if a court does not overturn a recent ruling requiring it to classify its drivers as full-time employees, CEO Dara Khosrowshahi said in an interview with Stephanie Ruhle on MSNBC on Wednesday.
“If the court doesn’t reconsider, then in California, it’s hard to believe that we’ll be able to quickly shift our model to full-time employment,” Khosrowshahi said.
Both Uber and rival Lyft have about a week to appeal a preliminary injunction issued by a California judge on Monday that will prohibit companies from further classifying their drivers as self-employed.
Following the order will require Uber and Lyft to provide benefits and unemployment insurance for workers.
California Attorney General Xavier Becerra and three prosecutors have filed a lawsuit against the companies under the new state law that aims to provide benefits to contract workers that are critical to a company’s business by classifying them as employees.
In his decision to grant the injunction, the judge rejected the notion that drivers should be considered outside the course of business for companies, calling the logic “a classic example of circular reasoning.”
The layoffs at Uber, Lyft or Airbnb have all been of engineers, administrative staff and people who usually worked in offices.
Uber and Lyft said they would appeal the ruling during the 10-day period before it takes effect.
Rather than classifying drivers as employees, Khosrowshahi has advocated for what he calls a “third way” that would maintain drivers’ independence while allowing companies to provide some protections without risking being viewed as employers. full time.
In a New York Times op-ed before the court ruling, Khosrowshahi said that companies like Uber could pay a fund that workers could draw on to get paid time off in health care benefits based on the number of hours they spend. they work.
In Nevada, about 300,000 people have applied for unemployment benefits in the last month, a record high.
Khosrowshahi said Wednesday that if Uber cannot win on appeal, his Plan Be would temporarily halt service in California. While it said Uber would later resume service in the state, it would likely be more city-centric, which could mean limited availability in less concentrated areas like the suburbs.
If the appeal doesn’t work out for Uber, it will be up to the voters to determine his fate. Khosrowshahi said that if that’s the case, the service would likely be shut down in California until November, when voters in the state decide on Proposition 22, which would exempt drivers from app-based transportation and delivery companies from being considered employees.
Uber has argued that its drivers prefer to work as independent contractors, although Becerra dismissed that claim as a “bogus argument.”
The company purchased millions of masks to distribute to its drivers around the world.
Khosrowshahi stressed that stopping service in the state would leave thousands of drivers without the revenue they would normally get from Uber. Still, ridership has declined during the pandemic anyway, which the judge said caused the court order to come in what is perhaps “the worst time” for Uber and Lyft to adjust their business models.
Becerra said in an interview on CNBC on Tuesday that he was not concerned about the possibility of Uber leaving the state as a result of the order. “Any business model that relies on workers who change little to achieve it probably shouldn’t be anywhere, whether in California or anywhere else,” he said.