Court Ruling Could Kill Uber and Lyft in California

Just days before Californians themselves were set to decide on the matter, a state appeals court has ruled that app-based ride-sharing companies Uber and Lyft must comply with state law AB5 and classify all of their drivers as employees rather than contractors. The ruling raises the possibility that the companies will simply end operations in the state altogether, both having stated previously that their business model depends on the flexibility of using contractors.

The companies claim, and drivers often confirm, that the flexibility of contract work is key to their operations. Employers are required under federal and state law to schedule and track their employees’ hours for overtime, unemployment, and other purposes. That’s not case with contractors, who are legally considered independent businesses.

Critics of the ride-sharing companies, such as California Gov. Gavin Newsom, claim that’s just a dodge to get out of paying overtime and complying with other workplace regulations. Labor unions have pushed for the drivers to be classified as employees, since contractors cannot join unions.