An appeals court has allowed ride-hailing giants Uber and Lyft to continue treating their drivers as independent contractors while an appeal works its way through the court.

Both companies had threatened to shut down if a ruling went into effect Friday morning that would have forced them to treat all their drivers as employees, a change they said would be impossible to accomplish overnight.

Hours before the appeals court ruling, the ride-hailing company Lyft confirmed in an online blog post that it would shut down in the state, suspending its rideshare operations beginning at 11:59 p.m. Thursday due to the ongoing legal dispute over the classification of drivers as employees or independent contractors.

The announcement came as Uber and Lyft drivers held a protest Thursday morning at Los Angeles International Airport, a demonstration that was planned earlier as they waited to find out if the rideshare giants would temporarily shut down services statewide.

Drivers are organizing alongside the Mobile Workers Alliance and the group is demanding that Uber and Lyft follow California's law that will re-classify them as employees, a move the companies said would have cause them to temporarily shut down services in the state.

Rideshare drivers are currently classified as independent contractors, but under a change as a result of the passage of Assembly Bill 5, they would be re-classified as employees. A shift would mean the drivers would receive benefits like overtime, sick leave and expense reimbursement.

A state court gave the companies 10 days to re-classify drivers as employees.

Uber CEO Dara Khosrowshahi said if the court didn't reconsider, it would have been difficult for the San Francisco-based company to switch over its model that quickly, forcing it to temporarily shut down.

California represents a substantial chunk of both companies' businesses. It accounted for 9% of Uber's worldwide rides before the pandemic caused people to avoid traveling. The state is even more important to Lyft, which doesn't operate outside of the U.S. besides Canada. California accounted for 21% of Lyft's rides before the pandemic, but that figure dropped to 16% during the April-June period as more people stayed at home and there were few places to go.

The unavailability of the two ride-hailing services also would have delivered another blow to the California economy by taking away the paychecks of Uber and Lyft drivers while also making it more difficult for people without cars to get around.

https://abc7.com/business/appeals-court-allows-lyft-and-uber-to-continue-operations-in-ca/6379664/