Uber at Risk of Temporarily Shutting Down in California | Financial Buzz

Uber at Risk of Temporarily Shutting Down in California

Uber (NYSE: UBER) is facing a temporary shut down in California amid a court order. The court strives to identify drivers as full-time employees as opposed to independent workers, something both Uber and rival Lyft are not on board with. 

“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,” CEO Dara Khosrowshahi said.

Both Uber and Lyft have approximately a week to file an appeal of the preliminary injunction granted by a California judge on Monday. The order would obligate the companies to facilitate benefits and unemployment insurance for their employees. 

Superior Court Judge Ethan Schulman made the ruling Monday and stated that both Uber and Lyft used “circular reasoning” when classifying tech workers as employees yet not its drivers. 

“Were this reasoning to be accepted, the rapidly expanding majority of industries that rely heavily on technology could with impunity deprive legions of workers of the basic protections afforded to employees by state labor and employment laws,” Schulman wrote.

Khosrowshah stated that if Uber were not able to win an appeal, it would need to briefly pause service within California. Though he made it clear that Uber would eventually recommence service in the state, its reach might be limited to cities rather than suburbs. 

Uber has claimed that its workers prefer to work as independent contractors, however California AG Xavier Becerra shunned that claim as a “bogus argument.”

“Any business model that relies on short-changing workers in order to make it probably shouldn’t be anywhere, whether California or otherwise,” Becerra said.