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Uber and Others Threaten to Leave California Over Independent Contractor Rules

Uber and Lyft threatened to suspend their passenger operations in California in late August over a new California law that requires companies to treat workers as employees rather than independent contractors if they contribute to the usual course of business.  Uber and Lyft, both based in California, who have large operations in that state, argue that drivers themselves would suffer over less flexibility, and the law would vastly reduce their work time. 

Uber also asserted that such a dramatic change in its business model would force it to build a new framework to monitor drivers and would result in an increase in cost of rides as much as 120%.  A California appeals court granted an emergency stay of the reclassification of the drivers to employees pending court appeal and an upcoming November state referendum on the issue.  The new California law is known as the "ABC Test," and relies largely on whether the services are within the normal course of the company's business and whether the workers have an independently-established role, replacing a test based on a balancing of many factors in determining who should be a contractor.  Ironically, the tightening of contractor status in California comes at a time when Americans are working as contractors at record levels, as the pandemic had led to many persons starting their own ventures as traditional jobs have been reduced.


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