Lyft will quit California ride-hailing tonight [Update: emergency reprieve]

Lyft is suspending its rideshare business in California today, as the battle between local politicians and Lyft and Uber over driver employment escalates. As of 11:59PM PT, Lyft has confirmed, you'll no longer be able to summon a ride from your phone. Uber is believed to be preparing for the same deadline.

It's a nuclear decision for what has become one of the states most aggressively embracing ride-hailing. However, while riders of Uber and Lyft may have been enjoying the service, state legislators have been less impressed.

At the heart of the controversy is California Assembly Bill 5, known as AB5, a state statute which expands a ruling by the Supreme Court of California. It deemed that most workers are actually employees, and that if they are to be classified as independent contractors – as Uber and Lyft have done for their drivers until now – then it's down to the company doing the hiring to prove that's the case.

Since employees are eligible for things like minimum wage laws, sick leave, and benefits in the case of unemployment among other things, the ruling was welcomed by many workers-rights advocates. At the same time, however, companies like Uber and Lyft have argued that they should not have to reclassify their drivers. Some drivers, too, have countered calls to be classified as employees.

Today, Lyft announced, the next step was ceasing service for its ride-hailing business in California altogether. "This is not something we wanted to do," the company wrote in a blog post, "as we know millions of Californians depend on Lyft for daily, essential trips."

"For multiple years, we've been advocating for a path to offer benefits to drivers who use the Lyft platform — including a minimum earnings guarantee and a healthcare subsidy — while maintaining the flexibility and control that independent contractors enjoy," Lyft argues. "This is something drivers have told us over and over again that they want. Instead, what Sacramento politicians are pushing is an employment model that 4 out of 5 drivers don't support. This change would also necessitate an overhaul of the entire business model — it's not a switch that can be flipped overnight."

Uber has also indicated that it will be ceasing operations in California by the end of the week. Both it and Lyft are advocates of Prop 22, which would change the rules around app-based drivers. Among the alterations would be special labor and wage policies unique to such drivers, restoring them as independent contractors. Prop 22 is on California's 2020 state ballot.

Update: An emergency stay of the ruling has given a last-minute reprieve to Lyft and Uber, FT's Dave Lee reports. The ride-sharing services will be able to continue operating, at least while the appeal process continues. That's expected to take place in October, though there's a September 4 deadline for the companies to submit plans as to how they would transition all drivers to employees should both the appeal and the Prop 22 vote fail to go in their favor.

Rideshare all good through to at least October as an appeal is heard. But – companies have until September 4 to outline their implementation plans for how they will make drivers employees in the event they lose the appeal and Prop 22 (the law they're backing) doesn't pass.

— Dave Lee (@DaveLeeBBG) August 20, 2020

Update 2: Lyft has confirmed the decision – and that it will continue operating – in an update:

"Rideshare is ON. The California court has granted our request for a further stay, so our rideshare operations can continue uninterrupted, for now" Lyft