By Jonathan Stempel
(Reuters) - A California judge signaled on Thursday he might be leaning against a request for a preliminary injunction forcing Uber Technologies Inc <UBER.N> and Lyft Inc <LYFT.O> to classify drivers as employees rather than contractors.
In a hearing in San Francisco Superior Court, the companies said the classification would irreparably undermine their business models, with Lyft's lawyer Rohit Singla saying it "would make things worse" for drivers and riders.
Judge Ethan Schulman said he would try to rule within "days" on the injunction request from California Attorney General Xavier Becerra and the cities of Los Angeles, San Diego and San Francisco, in their lawsuit filed May 5.
But he suggested caution before rushing into a potentially "sweeping" injunction that could affect hundreds of thousands of people.
"I feel like I'm being asked to jump into a body of water without knowing how deep it is, how cold the water is, and what's going to happen when I get in," he said.
Uber and Lyft were accused of violating a new state law requiring companies to classify workers as employees if they controlled how workers did their jobs, or the work was part of their normal business.
Several hundred thousand "gig" workers, including many at ride-hailing companies and app-based food delivery services, are affected by the law, Assembly Bill 5 ("AB5"), which had broad support from organized labor. It took effect on Jan. 1.
California is Uber's and Lyft's largest U.S. market.
The plaintiffs have said the contractor classification deprives drivers of essential benefits such as a minimum wage, overtime, sick leave, unemployment insurance and workers' compensation insurance.
They have also said it gives Uber and Lyft, which are not profitable, an unfair competitive advantage.
The companies have said most drivers would oppose being classified as employees, and job losses could be significant.
Matthew Goldberg, a lawyer for San Francisco, told Schulman that Uber and Lyft "dramatically overstated" the threat of negative fallout.
He also said drivers deserved benefits not available under federal law, even during the coronavirus pandemic.
"The full range of California safety net protections are what we think drivers are entitled to," Goldberg said.
Uber's lawyer Theane Evangelis countered that AB5 "did not outlaw independent work," and Uber was not a "hiring entity" covered by that law.
"Our platform is nothing like the caricature painted by the plaintiffs," she said.
Uber, Lyft, DoorDash, Instacart and Postmates are spending more than $110 million to support a November ballot measure in California, Proposition 22, to classify app-based drivers as contractors.
(Reporting by Jonathan Stempel in New York; Editing by Dan Grebler and Tom Brown)