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Uber, Lyft granted temporary reprieve from California court

Alexandrea Ravenelle, UNC Assistant Professor and Author of  ‘Hustle and Gig: Struggling and Surviving in the Sharing Economy’ joins Yahoo Finance to discuss Uber and Lyft.

Video Transcript

- A win for Uber and Lyft-- the two ride hailing companies narrowly avoided shutting down their services in California, though this relief will be temporary. The appeals court judge granted the businesses until October 13 to come up with a plan for converting their drivers to employees. Let's bring in Alexandrea Ravenelle, UNC assistant professor and author of "Hustle and Gig," to hash out these details. Alexandrea, good to see you this morning. Were you surprised by the 11th hour decision there in California?

ALEXANDREA RAVENELLE: Good to see you too, Alexis. You know, I actually was a little surprised. We thought that we were very close to having the courts kind of-- and the laws kind of hold these workers to being treated as W2 employees. And once again, Uber and Lyft have kind of scooted through by the skin of their teeth, if you will. And have been able to kind of just keep delaying on treating their workers fairly.

- How would this classification, if it were to go through-- classifying these workers as employees-- how would it change the lives of the gig workers?

ALEXANDREA RAVENELLE: Oh my gosh, this could be an astounding difference for these workers. You know, right now, Uber and Lyft drivers are responsible for all of their own expenses. They bear all of the risks of the work. So if there are no rides and they are out driving around looking for rides, they're burning gas, they have the wear and tear on their car, they're spending their time without getting paid for it.

There are other protections in terms of contributions to social security and Medicaid that would come from the company if they were paid as W2 employees. They might also be eligible for things like health insurance and paid time off and other workplace protections that many of us take for granted like protections from discrimination and sexual harassment. This is a game changer.

- You know, Lyft, Alexandrea, is urging people of California to support the proposition 22 ballot measure that keeps workers in the gig economy as independent contractors. They want to put that proposition up for a vote in November. If it comes to that, what are you expecting? How do you think people will vote?

ALEXANDREA RAVENELLE: I am optimistic that the people will realize what's going on. That they are being used by the company to exploit fellow workers. At the same time, you know, we've seen Uber and Lyft do things like this before-- this sort of Astroturf grassroots organizing. We saw Uber do the same thing in New York City, when New York City was trying to put limits on the number of drivers. And they actually changed their app to say that this was going to be New York under de Blasio's plan of limiting rides and no one would be able to get anywhere.

So I think we're just going to continue to see many more of these tactics from these companies. But hopefully, people are beginning to realize what's going on.

- Theoretically, if these workers are classified as employees, it changes the whole business models of Uber and Lyft. Can they survive the next five years if they now have all of these added costs on their business?

ALEXANDREA RAVENELLE: So that's a really good question. The companies say that they can't, but, you know, California is one of the largest markets for ride share. And so I think even if Uber and Lyft end up pulling out of California, we'll see other companies that will step in to fill that hole and that will be classifying their workers as W2 employees. You know, it's a little problematic that you've created a business where your entire plan is essentially built on it taking advantage of workers and not paying them a sufficient wage or protecting them in any way.

- What does this mean for Uber and Lyft in other markets, in other major cities? I mean, this would be precedent-setting for them.

ALEXANDREA RAVENELLE: It really would be. So in other markets, we have slightly different things going on. In New York and Illinois and in New Jersey, we've also had some attention paid to doing things similar to AB5. In New York, many drivers are already full time drivers because they have to follow the same requirements as yellow cab drivers taxi, cab drivers. So we might see that the restrictions on them are kind of just a return to the way taxi driving used to be. But it will be interesting to see what the impact is in New Jersey or in Illinois-- places where many people might only drive part time for Uber as opposed to doing-- or Lyft-- as opposed to doing it as a full time job.

- Lots more to come on this story. Alexandrea Ravenelle, UNC assistant professor. Thanks for being with us. Have a great weekend.

ALEXANDREA RAVENELLE: Thanks, you too.