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Uber, Lyft to halt California rides unless appeals court steps in

Yahoo Finance’s Brian Sozzi, Alexis Christoforous, and Dan Howley discuss the showdown between Uber, Lyft and the state of California.

Video Transcript

BRIAN SOZZI: Let's get right to Yahoo Finance tech editor Dan Howley. Dan, moment of truth is coming with Uber and Lyft and California. Do each of these companies ultimately pull out?

DAN HOWLEY: It's really a highly-- a high probability that they might, right. They have done this before. They've kind of bullied their way into the positions they want in certain cities. They've done this in Austin before. They've done this in London. They did it to a degree in New York where what they do is they'll kind of rally drivers and users to their own cause and try to get different measures overturned.

This is an appeals court. They're looking to appeal a ruling, an injunction basically saying that Uber and Lyft were flouting the law AB5 that would make their drivers into actual employees. Now, what they're waiting for is to see if they can have this injunction held up, which would put that law into place for them, or put the requirements to place for them past Friday.

The terms for this end at 11:59 tonight. So we'll find out if, in fact, Uber and Lyft will continue to operate in California at that time. But if nothing happens in their favor by then, they may completely stop. And that could significantly hurt a number of drivers in that state.

BRIAN SOZZI: Dan, why can't the same thing happen outside of California to both Uber and Lyft?

DAN HOWLEY: It could. This was basically a measure that the California state assembly had put together, AB5. Basically, it says that gig workers have to be treated as full-time employees. And obviously, with Uber and Lyft, they're the largest gig employers in that state. So that's really what the issue comes down to is can they really make these people employees. And both companies say they can't.

Look, these are companies that are still losing money, right. They're not making money, and the past few quarters have been horrible for them outside of Uber's Eats business. So I mean, it really does seem like it comes at a bad time for them. But on the flip side, they knew about this law coming for some time now. So this isn't exactly out of the blue.

BRIAN SOZZI: All right. Dan Howley, thanks so much.