by Raymond C. Niles
The American Institute for Economic Research
Lyft and Uber have gotten a temporary reprieve and have been walked back from the gallows. A California appeals court has issued a temporary restraining order barring enforcement of California law AB5, which would have forced both companies to reclassify their drivers as employees, rather than as independent contractors. Both companies had planned to shut down operations in the state at midnight yesterday, rather than obey the law.
Why were Lyft and Uber willing to shut down? It is dollars and cents. By being forced to classify their drivers as employees, Lyft and Uber would be forced to incur huge new expenses on behalf of each of their drivers to pay for mandatory new benefits. And they must incur these expenses on their drivers’ behalf whether or not they want those benefits, given the cost.