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Will Uber shut down in California? CEO Dara Khosrowshahi threatens just that

The shutdown would last until November, Khosrowshahi said, to wait for California residents to vote on Proposition 22.

Will Uber shut down in California? CEO Dara Khosrowshahi threatens just that
[Photo: Charles Deluvio/Unsplash]

Uber CEO Dara Khosrowshahi this morning notified us that the ride-hailing company could shut down for several months if forced to classify its drivers as employees rather than freelancers.

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The comments come amid a nearly year-long scuffle between Uber and California, beginning with the passing of the state’s Assembly Bill 5 last September—which was meant to reform the gig economy by reclassifying independent contractors as employees, thus entitling them to labor rights such as minimum wage, sick leave, and workers’ compensation. Litigation ensued between the state and gig-economy giants Uber and Lyft, over issues including the bill’s constitutionality and the companies’ refusal to comply with the law.

Last week, a California judge granted the state a preliminary injunction, which will prohibit Uber and Lyft from classifying their drivers as independent contractors. The companies were given 10 days to appeal the judgment or fall in line.

“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,” Khosrowshahi said today in an interview with MSNBC. I.e., if Uber’s appeal fails, it will likely shut down temporarily. And when it restarts operation, it’ll likely be concentrated in cities, with limited service in suburbs and rural areas, and higher fares for passengers.

Khosrowshahi’s threat of a world without Uber looms ominously in California, where voters will be asked to weigh in on the fight via a November ballot measure. Proposition 22, which was backed by Uber and other gig-economy employers, would exempt transportation and delivery apps from classifying their drivers and couriers as employees.

According to Khosrowshahi, the shutdown would last until voting day. It would also leave thousands of drivers—caught in the crossfire of ongoing legal warfare—without income for nearly three months. Drivers have already faced difficulty obtaining jobless benefits and a lack of healthcare during the pandemic.

Reached for comment, an Uber spokesperson told Fast Company, “The vast majority of drivers want to work independently, and we’ve already made significant changes to our app to ensure that remains the case under California law. When over 3 million Californians are without a job, our elected leaders should be focused on creating work, not trying to shut down an entire industry during an economic depression.”

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