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Illustration: Lazaro Gamio/Axios

Uber and Lyft are ratcheting up the fight with California’s state government over the classification of drivers with a move that would deprive Californians of their ride-hailing services (and halt driver income).

Driving the news: On Wednesday, both companies said that if a court doesn’t overturn or further pause a new ruling forcing them to reclassify California drivers as employees, they’ll suspend their services in the state until November’s election, when voters could potentially exempt them by passing a ballot measure.

Between the lines: Many critics suggested the companies are bluffing, but I’m not so sure. A few reasons...

  1. The logistics aren’t trivial. They’d have to figure out staffing needs and a schedule, hire however many drivers they need, and onboard everyone.
  2. It’s unlikely the companies want to go through all the above, just to reverse course if they win in November.
  3. Depriving customers of these services could get them more support in November. The companies have, in the past, successfully turned customers into their political advocates.
  4. With demand for ride-hailing already being significantly deflated, the additional drop in revenue is perhaps something they’re willing to swallow.
  5. Even if they could make these shifts quickly, it’s unlikely the companies want to give drivers a taste of employee life and risk sabotaging their ballot measure.
  6. Lastly: They’ve done it before. In 2016, when Austin passed new rules requiring driver fingerprinting, Uber and Lyft suspended operations and didn’t return until Texas overrode the rules a year later.

Why it matters: Only Uber and Lyft are party to this lawsuit, but several district and city attorneys — and regulators — are already suing other gig economy companies like Instacart and DoorDash over the same California law.

  • What happens at the California ballot box in November will have ramifications beyond Uber and Lyft’s ride-hailing businesses.
  • It could also affect the future of high-demand services like food and grocery delivery, which have become critical for many Californians while the COVID-19 pandemic continues.
  • (Uber also operates a food delivery business and recently agreed to acquire rival Postmates, which is widely popular in California cities like San Francisco and Los Angeles.)

The bottom line: Don’t expect these companies not to pull out all the stops to fight this.

Go deeper

Nov 10, 2020 - Podcasts

Lyft co-founder John Zimmer on what comes next for the gig economy

Gig economy companies like Lyft and Uber got a huge win in California last week, when voters approved a measure that will let them continue to classify many of their workers as independent contractors instead of employees.

Axios Re:Cap digs into the ballot measure and what comes next, both in California and nationally, with Lyft co-founder and President John Zimmer.

Nathan Bomey, author of Closer
2 hours ago - Economy & Business

Tesla delays Cybertruck until 2023

Tesla debuts the Cybertruck in Hawthorne, Calif., on Nov. 21, 2019. Photo: Frederic J. Brown/AFP via Getty Images

Tesla is at risk of falling behind on one of the most critical products in the American auto industry: pickups.

Why it matters: Pickups are the most profitable segment in the business and account for the first, second and third best-selling vehicles in the country. Without a serious pickup strategy, Tesla could miss out on a huge source of future income.

Defense taking steps to mitigate civilian harm after botched airstrikes

Secretary of Defense Lloyd Austin speaks during a news conference at the Pentagon in Arlington, Virginia on Sept. 1, 2021. Photo: Andrew Harrer/Bloomberg via Getty Images

Defense Secretary Lloyd Austin issued a directive Thursday to improve the U.S. military's approach to civilian harm mitigation and response, calling it a "strategic and a moral imperative."

Why it matters: The Pentagon has faced criticism for years for amassing civilian casualties in its missions, especially in the Middle East. New York Times investigations have found systemic failures in efforts to prevent civilian deaths, as well as a cover-up of a 2019 airstrike that killed dozens of women and children in Syria.