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Uber CEO says his service is likely to shut down in California temporarily if it has to designate drivers as employees.



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Under the latest decision that allows the court to recognize its drivers as full-time workers, Uber will possibly shut down indefinitely for a span of several months, CEO Dara Khosrowshahi said in an interview with Stephanie Ruhle Wednesday on MSNBC.

“Is it hard to imagine that if the court doesn’t appeal then we will be able to turn our model to full-time jobs fast in California,” Khosrowshahi said.

Uber and competitor Lyft have left for about a week to challenge a preliminary injunction released by a judge of California on Monday that would bar companies from continuing to recognize their drivers as independent employees. Following the order, Uber and Lyft would provide employees with wages and unemployment insurance.

The Attorney General of California and three city attorneys brought a complaint under the new State law Assembly Bill 5, which seeks to offer benefits to gig staff in a company’s industry, by classifying them as employees. During his decision granting the preliminary injunction, the judge dismissed the idea that drivers must be considered “a classic example of circular logic” in the context of the business enterprises.

Both Uber and Lyft said they would appeal the ruling for 10 days before it comes into effect.
Khosrowshahi proposed what he called a “third path” to preserve drivers’ freedom while providing businesses with security without fear being considered to be fulltime workers, rather than classifying drivers as employees. In a New York Times that opted in advance of the court decision, Khosrowshahi told contractor companies like Uber that they should pay into a fund that workers would tap into pay-offs or health insurance depending on working hours.

Khosrowshahi said on Wednesday that his Plan B would be a temporary break in California if Uber did not win a bid. Although Uber said he would resume service later in the state, it will possibly focus more on cities, which may result in reduced availability in less populated areas, such as suburbs.

Unless Uber doesn’t make the appeal, he must depend on voters to decide his destiny. Khosrowshahi said that if that were the case, the company was likely to shut down in California until November after state voters had voted on Proposition 22, which would prohibit drivers from being considered workers for app-based transportation and distribution companies. Uber claimed that its drivers tend to operate as independent contractors, but Xavier Becerra dismissed this assertion as a “fake statement.”

Khosrowshahi stressed that the state’s pause program would leave thousands of drivers without the income normally received from Uber. Nevertheless, during the pandemic, as the judge claimed, Uber and Lyft had an injunction at the “lowest time” to change their business models.

In a CNBC interview on Tuesday Becerra said that he was unconcerned about Uber ‘s ability to quit the state.

“Any business model that is focused on short-sighted employees will certainly not be there, either in California or elsewhere,” he said.

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