In the state of California, a new storm is brewing. Uber’s CEO Dara Khosrowshahi said in a recent interview that a recent court order could prompt a shutdown of Uber’s services in the state. So what’s going on here?

Uber Shutdown

CNBC reports that Uber’s CEO made the threat in a recent interview on MSNBC with Stephanie Ruhle.

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.

As the clock keeps ticking, both Uber and Lyft have one week left to appeal against a preliminary injunction passed by a judge in California. The injunction would prohibit companies like Uber and Lyft from classifying drivers as independent workers. Instead, they’ll have to treat them as employees, thereby requiring to provide benefits and unemployment insurance.

However, critics point out that Uber’s CEO is simply using the shutdown threat as a bargaining chip. This piece in the LA Times advocates that the state of California should not accede to Uber’s demands.

First, it should be remembered that the issue in the state lawsuit is whether Uber and Lyft should be required to comply with Assembly Bill 5, the 2019 law that requires that workers such as drivers for ride-hailing companies be brought on as employees and granted all the benefits that employees generally receive.

Those include a minimum wage, overtime pay, workers’ compensation, the right to form a union, and protection by anti-discrimination and paid sick leave laws, among other benefits. “Independent contractors” don’t get any of that, and Uber drivers have to pay for their own fuel, auto maintenance, insurance and other expenses themselves.


The Pundit’s Mantra

At the moment, this threat seems to have little credibility. The Covid-19 pandemic has already hit Uber’s business hard. A shutdown could mean a loss of business in key markets like San Francisco and Los Angeles.

If the appeal fails, Uber will have to rely on voters to determine the way ahead by voting on Proposition 22.

What do you think about this ongoing court battle? Do you think Uber’s threat is serious or just a part of their legal strategy? Tell us in the comments section.


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