OAKLAND, Calif. - Uber CEO Dara Khosrowshahi said Wednesday that the company could be forced to halt service in California if a judge rules that the ridesharing company has to classify drivers as employees.
Lyft made a similar claim shortly after Uber's statement.
San Francisco Superior Court Judge Ethan Schulman ruled on Monday that Uber and Lyft must classify drivers as employees instead of independent contractors, based on state law AB5, which took effect on Jan. 1.
"We think we comply by the laws, but if the court finds that we're not, and they don’t give us a stay to get to November, then we’ll have to essentially shut down Uber until November when the voters decide," Khosrowshahi said on MSNBC
The new law gives drivers certain labor rights that contractors typically don't have such as workers' compensation, unemployment benefits, and the right to unionize.
Schulman issued a 10-day stay of the ruling to give Uber and Lyft time to appeal.
In a court filing, Uber's attorneys said there would be "catastrophic and irreparable harm that will result from the fundamental restructuring of Uber Rides" if the change in status for drivers took effect.
"Uber will almost certainly be forced to shut off the Rides platform in California if the injunction goes into effect," said the court document.
Uber and Lyft are backing Proposition 22, which will appear on the November ballot in California. If enacted, gig companies would be exempt from abiding by AB5, meaning that drivers would not be treated as employees.
Khosrowshahi said in the MSNBC interview that Uber has made significant changes to its model in California to give drivers more control. Khosrowshahi pointed out that drivers can set their own prices and they have the flexibility to decide if they want to take a ride or not.
"We think we comply by the laws, but if the court finds that we're not and they don’t give us a stay to get to November, then we’ll have to essentially shut down Uber until November when the voters decide," he said.
The Uber head said he is hoping for a "best of both worlds" outcome.