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Uber and Lyft threaten to halt service in California if forced to reclassify drivers

The announcements come after a judge rules the ride-hailing companies must classify their drivers as employees.

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Uber and Lyft drivers have held dozens of protest across California demanding to be classified as employees.

James Martin/CNET

Uber and Lyft both said on Wednesday that if California forces them to classify their drivers as employees, they'll suspend operations in the state. The announcements come after a California judge ruled Monday to place an injunction on the two companies that would require them to follow state law and reclassify their drivers. 

"If the court doesn't reconsider, then in California, it's hard to believe we'll be able to switch our model to full-time employment quickly," Uber CEO Dara Khosrowshahi said in an interview with MSNBC on Wednesday. 

Similarly, Lyft President John Zimmer said during an earnings call with investors on Wednesday that "If our efforts here are not successful, it would force us to suspend operations in California."

Judge Ethan Schulman of the San Francisco Superior Court wrote in a decision on Monday that the injunction against the companies won't be enforced for 10 days to give them a chance to appeal -- something both companies said they're doing.

The injunction is part of a lawsuit against Uber and Lyft filed by the state of California in May. The suit says the companies "exploited hundreds of thousands of California workers" by classifying drivers as independent contractors and are violating California's AB 5 law, which took effect in January.

Uber and Lyft currently classify their drivers as independent contractors, which means the workers pay for their own expenses, such as gas, car maintenance and insurance. Drivers also don't have labor benefits like minimum wage, health insurance or paid sick leave. If they were to be classified as employees, many of those costs would then fall onto the companies.

Uber and Lyft's lawyers said during a hearing regarding the injunction last week that while drivers are crucial to ride-hailing, they're not core to the companies' businesses. Uber's lawyer said the company is a technology platform, not a transportation provider.

In his decision on Monday, Schulman disagreed.

"To state the obvious, drivers are central, not tangential, to Uber and Lyft's entire ride-hailing business," he wrote.

Uber and Lyft both said Wednesday that if they don't win their appeal, the halt in operations would last through November. 

That timing is aligned with a state-wide vote on a California ballot measure that the companies are backing. In all, Uber and Lyft -- along with Doordash, Postmates and Instacart -- have put $110 million behind the measure, called Proposition 22. The proposition seeks to exempt the gig economy companies from AB 5.