Are Uber and Lyft just bluffing?
The two ridesharing services have threatened to temporarily shut down operations in California after a judge refused to grant them an exemption from AB5, the new state law that would require companies to classify drivers as employees.
The court injunction gave Uber and Lyft 10 days from the Aug. 10 decision to change the independent contractor status of their drivers and provide them with benefits such as health insurance and minimum wage. The companies, which are appealing the decision, have already lost an offer to extend the 10-day stay on the injunction, confirming the deadline to reclassify drivers – or suspend operations in the state – by 20 August.
California is home to both brands and a large market for each. Leaving would be a risk not only for Uber and Lyft, but for tens of thousands of business-dependent drivers for their income, and for customers who depend on them for transportation.
It’s just the kind of pressure that could help build support for Proposition 22, a California voting initiative backed by concert platforms, to exempt them from reclassifying drivers as employees. But the ballot question will not be asked to voters until November, which means that unless there is a successful appeal to the court, companies would have no choice but to comply with AB5 from the 20 August until the exemption, if they win one from voters, goes into effect.
A familiar scene for Uber
It’s a familiar scene for Uber, which has regularly threatened cities and won over customers in the face of regulations that would change its business model. In 2015, when New York City first considered limiting the number of transportation vehicles, Uber launched an aggressive campaign in response, positioning mainstream taxi drivers as having a history of discriminating against people. people of color. In 2016, Uber left the city of Austin, Texas, after city council began requiring enhanced driver background checks. Uber returned the following year after the governor of Texas signed a law rescinding the city’s rules.
If Uber and Lyft were to leave California, the impact on the earnings of both would be relatively small due to the pandemic. Trips have decreased by at least 80% in California for Uber and Lyft, according to data from research firm Second Measures.
“Considering depressed ride volumes now due to the pandemic, this is probably the best time to [Uber and Lyft] have to do it, ”says Tom White, analyst at DA Davidson. “It could motivate voters even more to bring carpooling back to California in the election.”
Whether or not Uber and Lyft follow through on their threat, it’s clear the two companies plan to redouble their efforts to win on Prop 22, rather than changing their business models.
“We’re focused on Prop 22, and we’re confident we’ll get things done,” John Zimmer, president of Lyft, said during the company’s second quarter earnings call.
A third way?
Uber, while firmly resisting AB5 regulations, has offered further concessions on flexible working. Ahead of the recent California court ruling, Uber CEO Dara Khosrowshahi wrote in a New York Times editorial about the need for a “third way,” which would give drivers a safety net while preserving their safety. self-employed status.
But Brian Chen, an attorney with the National Employment Law Project, says there’s nothing in the law that requires an employee to give up their flexibility. “It’s just another threat from companies, that if they’re held accountable by the public, they’re going to go after their workers,” he says. (Uber has warned that if it is forced to reclassify drivers as employees, there will be fewer drivers on the road and prices will rise.)
Since AB5 took effect in California, both Uber and Lyft have faced increasing pressure elsewhere on their business models. In recent weeks, Pennsylvania’s highest court has upheld an UberX driver’s eligibility for unemployment benefits, while in Massachusetts, the state attorney general has sued Uber and Lyft, challenging how they classify the drivers.
Meanwhile, the pandemic is widening the inequalities between the different classes of workers. The increased attention to the treatment of workers could influence voters’ opinions, union organizers say.
“The calls for them to change their operating business model are getting louder every day,” said Steve Smith, spokesperson for the California Labor Federation. “We are convinced that voters have no desire to give these companies a free pass to continue deceiving workers and shifting the burden to taxpayers.”
Uber, Lyft, Instacart, DoorDash, and Postmates have raised over $ 110 million to support Prop 22, which would make drivers eligible for minimum wage, health care subsidies and car insurance, but not rank them as employees. However voters decide on the issue, it could become a role model for other states and change the landscape for millions of working Americans.