Uber and Lyft said they would stop operating in California on an order to hire drivers in California state courts as employees.
“If the court order to convert Uber drivers into full-time workers does not change, we will have to stop service in California by November,” said Dara Khosrowshahi, CEO of Uber on Wednesday.
“If the court does not overturn its decision, it may be necessary to stop the car call business in California from the 21st,” said John Zimmer, CEO of Lyft co-founder.
According to Lyft CEO John Zimmer, 16 percent of Lyft’s total number of boardings comes from California.
The 16 percent total number of boarding is that 16 percent of total sales come from California.
The suspension of services in California, the largest market in the United States, is interpreted as a sharp decline in sales.
So why did he make this decision?
Lyft’s California service disruption is attributed to the fact that employee employment has a significant impact on profitability.
Earlier, the San Francisco Superior Court in California issued a preliminary order on Tuesday to convert Uber and Lyft drivers to employees, not contractors.
The California state ruled in January that it had enacted a bill to classify vehicle-sharing drivers and food delivery workers based on them as employees.
The state decided that drivers and delivery workers were classified as contract workers while using them as employees, not providing basic work benefits such as minimum wage, employment insurance, and oil leave.
Uber and Lyft are categorizing drivers as contract workers.
Therefore, the company does not need to bear the burden of minimum wage, overtime allowance, and unemployment benefits.
However, according to the California court ruling, if a driver is classified as an employee, the minimum wage, health insurance, employment insurance, and paid leave should be applied, and union formation and negotiating rights will be also obtained.
Barclays, an investment bank, believes that Uber should spend at least $ 508 million in labor costs per year in California if it follows the court’s ruling.
Uber and Lyft have immediately announced their intention to appeal and are considering a service suspension in California if they can not win the appeal.