Uber and Lyft get new deadline for AB 5 compliance

A Court of Appeal decision to extend the deadline for Uber and Lyft to comply with California's gig worker law -- but only if the companies agree to certain conditions -- will force them to think seriously about how they might change their California business models, stakeholders said Thursday.

Uber and Lyft agreeing to abide by Assembly Bill 5 in the specific way envisioned by state entities -- that is, by treating rideshare drivers as their employees -- is just one option the companies have at their disposal, these stakeholders said.

As conditions of Thursday's ruling to stay a trial court's Aug. 10 preliminary injunction order, which required Uber and Lyft to follow state labor law requirements by Friday, the 1st District Court of Appeal asked the companies to agree to some procedural requirements and deadlines. Significant among them was the requirement for each company's chief executive officer to submit a sworn statement confirming they have concrete plans for complying with the preliminary injunction by Sept. 4, in case the court decides to uphold the injunction.

This condition is a highly unusual move, said Kelly O. Scott, who represents employers as partner at Ervin Cohen & Jessup LLP. "A lot of the time on appeal it's a little more cut and dry," Scott explained. "Either the decision is upheld or the decision is remanded."

Saba Waheed, research director at the UCLA Labor Center, said the condition is significant -- especially because a cornerstone of Uber's and Lyft's argument against the Aug. 10 preliminary injunction order was that it only gave them 10 days to comply with AB 5, which would entail reclassifying thousands of drivers as employees instead of their current status: independent contractors.

AB 5 went into effect Jan. 1. Since then, Uber and Lyft have been "working every way they can to figure out how they can ... get out of AB 5," Waheed said, pointing to the companies' backing of Proposition 22, a ballot measure which would exempt rideshare drivers from the law. By forcing the companies to develop a plan for compliance, she said, "at least they can do some real thinking around it."

But changing their relationship to rideshare drivers so that it fits a traditional employer-employee model is not the only way the companies can come into compliance with AB 5, Waheed said, noting in Germany and Spain Uber uses a franchise-like business model. Earlier this week, Uber and Lyft were widely reported to be considering a similar model in California.

Waheed also pointed to an effort in California called the Cooperative Economy Act, which was drafted by labor and worker advocates in response to AB 5. "A cooperative model .. kind of resembles a franchise in the sense that you have this middle entity, but then this middle entity would be owned and operated by the drivers," she said.

Thursday's ruling came hours after Lyft announced it would be suspending services without a definite end date, in response to the Aug. 10 preliminary injunction. Lyft confirmed it rescinded the suspension after the Court of Appeal stayed the injunction.

"The California court has granted our request for a further stay, so our rideshare operations can continue uninterrupted, for now," read a post on Lyft's blog.

Uber did not provide a date on when it might suspend services before Thursday's ruling, but a spokesperson for the company said after the ruling in an email statement, "We are glad that the Court of Appeals recognized the important questions raised in this case, and that access to these critical services won't be cut off while we continue to advocate for drivers' ability to work with the freedom they want."

But Scott doubted the companies would have pulled out of California for good, even if the Court of Appeal had affirmed the trial court's decision. "California is the most populated state. There is a lot of money to be made here," he said. "I don't think Uber and Lyft are going to want to walk away and let some other company step into that void."

Attorneys for Uber and Lyft filed a request for an emergency stay of the Aug. 10 preliminary injunction on Monday. People of the State of California v. Uber Technologies, Inc. et al., A160706 (Cal. App. 1st Dist., filed Aug 17, 2020).

The trial court case was filed by Attorney General Xavier Becerra, Los Angeles City Attorney Mike Feuer and San Diego City Attorney Mara Elliott in May.

"We're confident in the facts of our case and we look forward to continuing our fight to defend the rights of workers across the state," a spokesperson for Becerra said in an email in response to the Court of Appeal's ruling.