California sues Uber and Lyft for misclassifying drivers as contractors

California sues Uber and Lyft for misclassifying drivers as contractors

"While our Rides business has been hit hard by the ongoing pandemic, we have taken quick action to preserve the strength of our balance sheet, focus additional resources on Uber Eats, and prepare us for any recovery scenario", CEO Dara Khosrowshahi said in a press release.

Ahead of its earnings report today, shares of Uber rose around 11%, buoyed by a set of financial results and promises about the future from Lyft that were rated highly by investors.

On Wednesday, Lyft said it had seen a decline of more than 70% in trips on its platform as the USA started to implement shutdown orders.

The San Francisco-based company reported a loss excluding interest, taxes and other costs of $85.2 million for the first quarter.

For the first quarter ending on March 31, Lyft (NASDAQ:LYFT) reports EPS and revenue beats with sales up 24% Y/Y.

GAAP revenue of $819 million, up from $536 million in the year-ago quarter, or 53%.

In response to TNM's queries on the layoffs, Uber said, "We are aware of our obligations under government guidelines issued during the lockdown".

The US firm announced it would cut the headcount of its 20,000 plus staff by more than 14pc in cost cutting due to the pandemic, reducing customer support staff and recruitment teams.

It is also important to note that investors were likely calmed down on Bloomberg reporting that US and China's top trade negotiators Robert Lighthizer and Liu He are expected to talk on trade as early as next week. Online ordering from grocery stores and restaurants has surged since the US declared a national emergency in March.

Lyft's better-than-expected numbers are thanks to a ridership increasing 3% year-over-year to 21.2 million active riders even with COVID-19 affecting the company toward the end of the quarter.

Before the pandemic, Uber was spending heavily to grow Eats as it faced heavy competition from DoorDash Inc. and Postmates Inc.

Uber's net loss of $2.94 billion was worse than its other profit metrics, including its adjusted EBITDA for the quarter which came to a loss of$612 million.

The Tuesday complaint accuses the ride-hailing giants of misclassifying their drivers as independent contractors and denying them protections such as a minimum wage, overtime pay, sick leave and unemployment benefits.

Uber and Lyft have faced pressure from regulators and lawmakers over how their drivers are classified, and on Tuesday California sued the companies, citing the state's gig-economy law that became effective January 1.

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