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Uber's Attempt to Delay California Injunction Order Fails

Zacks Equity Research
·3 min read

Uber Technologies’ UBER fight to maintain the independent-contractor status for its drivers seems to be going out of hands. A California superior court judge did not give in to the company’s pleas for an extension of the stay regarding a preliminary injunction that would force Uber to categorize its drivers as employees.

San Francisco Superior Court Judge Ethan Schulman stated, "I am unconvinced that any extension of the 10-day stay is required." The injunction order is set to go into effect from Aug 20. Earlier Uber, carrying a Zacks Rank #3 (Hold), gave a heads up that it might have to temporarily suspend operations in California if the stay is not extended. TechCrunch reported that the company plans to file an appeal soon.

A temporary suspension of operations in California will not only affect Uber’s operations but is also a cause of concern for its drivers who generate income from it. It would also inconvenience numerous people in the state who rely heavily on Uber rides for traveling and find it safer compared to public transportation amid coronavirus.

Uber’s attorneys requested that the injunction should be stayed until the Court of Appeals takes its final decision on the ruling, arguing that “Uber will almost certainly be forced to shut off the Rides platform in California if the injunction goes into effect, which would irreparably harm Uber and all who rely on its Rides app to generate income for them and their families — particularly in the midst of a pandemic.”

Uber’s rival Lyft LYFT, which follows a similar business model of classifying drivers as independent contractors, is also embroiled in the same legal battle with California. Lyft carries a Zacks Rank #4 (Sell).

In order to defend the independent-contractor status, Uber and Lyft have funded a November ballot initiative, Proposition 22 (Prop 22), where voters get to decide whether their drivers should be classified as employees or independent contractors. The Prop 22, however, requires these companies to provide drivers with a number of worker benefits, including a certain amount of guaranteed earnings, a healthcare stipend and accident insurance for on-the-job injuries. The companies are currently exempted from offering these benefits to their drivers.

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