Uber to operate food delivery even if rides business forced shut in California

FILE PHOTO: An Uber Eats food delivery courier's backpack is seen in Paris during a lockdown imposed to slow the spread of the coronavirus disease (COVID-19) in France, France, April, 1, 2020. REUTERS/Gonzalo Fuentes

(Reuters) - Uber Technologies Inc UBER.N on Monday said it would continue operating its revenue-generating food delivery business Uber Eats even if its ride-hail business should be forced shut in California at the end of this week following a court order.

A company spokesman said Uber’s food delivery unit did not appear to be impacted by a lawsuit filed by California’s attorney general and a subsequent court order that would force Uber to treat its ride-hail drivers as employees.

Uber and smaller rival Lyft Inc LYFT.O said they would be forced to shut their ride-hailing operations in California if the court ruling goes into effect on Friday morning.

Eats has been a boon to Uber during the pandemic as Americans stay home and many businesses and restaurants remain shut. Delivery orders in the second quarter more than doubled, while ride-hailing trip bookings, in the past responsible for nearly two-thirds of Uber’s revenue, were down 75% from last year.

California represents 9% of Uber’s global rides and Eats gross bookings, but a negligible amount of adjusted earnings before interest, taxes, depreciation and amortization, Uber said in November. Lyft, which only operates in the U.S. and does not have a food delivery business, on Wednesday said California makes up some 16% of total rides.

Both companies said California was among the U.S. markets recovering the slowest from the pandemic.

California accuses Uber and Lyft of violating a new state law making it harder to treat “gig” workers as independent contractors.

A state court judge on Aug. 10 blocked Uber and Lyft from classifying drivers as contractors, an order that will take effect after midnight on Friday morning.

Uber and Lyft have filed appeals, but it remains unclear if the higher court will issue a decision before the Thursday evening deadline.

Reporting by Tina Bellon in New York; Editing by Sandra Maler and Richard Pullin