Uber (NYSE:UBER) is warning its customers in California that if an appeals court doesn't issue a motion to stay implementation of a state law classifying drivers as employees, the ridesharing company will suspend all service in the state Thursday night.
In a blog post on its website, Uber told customers it was an eventuality they should plan for, but also encouraged them to support a bill on the November ballot that would correct the problems of the current law.
A better business model
While Uber is contemplating changing to a franchise-like model in California, the ride-hailing app is not certain that would be feasible in the state. But regardless, it would take more time to implement than Uber or rival Lyft (NASDAQ:LYFT) have under the state attorney general's deadline.
They have until midnight tonight, Aug. 20, to comply with California law AB 5 that requires gig workers be classified as employees instead of as contractors, which would entitle them to benefits and would significantly raise costs for the companies.
Analysts estimate Uber would see costs rise by approximately $500 million annually and Lyft some $290 million annually.
Uber's blog post told its app users: "We know that riders rely on Uber to get around, and drivers rely on the Uber app to earn income. We wanted to let you know that [service suspension] is a possibility, so you can plan accordingly."
It also asked customers to support Proposition 22 in November, which would let companies that hire gig workers to pay into a pooled benefits fund as a way to provide healthcare and other benefits to drivers.
California accounts for around 9% of Uber's total revenue and as much as 16% for Lyft.