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Uber is reportedly revoking California drivers’ privileges, including setting their own prices, given by the company to avoid reclassifying its workers as employees under AB5. The company is claiming too many drivers took advantage of them, which ultimately hurt their business.
California lawmakers passed AB5 in 2019 as a way to make it harder for companies like Uber and Lyft to skirt labor laws and off-load healthcare and unemployment-insurance costs to taxpayers by misclassifying their workers as independent contractors. However, Uber and Lyft refused to comply. They argued that AB5 didn’t apply to their drivers because they aren’t core to their business and that drivers really are independent because they’re “free from the control and direction” of the companies.
Luckily for the gig economy companies, California voters passed Prop. 22 in Nov. 2020, essentially exempting companies like Uber from complying with AB5. A 2019 estimate by Barclays analysts reportedly showed that this decision saved Uber as much as $500 million per year by exempting them from having to pay for benefits like minimum wage, unemployment, and health insurance.
In Jan. 2020, Uber gave California drivers more control in an attempt to prove its independence argument. Said drivers were allowed to set their own prices for rides and see passengers’ destinations before picking them up. Together with companies like Doordash, Instacart, and Lyft, Uber spent a collective $200 million in the PR campaign to pass Prop. 22.
But now that Uber no longer needs to convince California authorities that its drivers are independent, the company plans to reclaim control. According to the ride-hailing giant, too many drivers took advantage of the control Uber gave them, picking the most profitable rides while declining others, which made it harder for customers to get rides and hurt Uber’s business. The San Francisco Chronicle reported that one-third of drivers turned down 80% of rides.
Quoted by Business Insider, Harry Campbell, who runs The Rideshare Guy, a popular blog among drivers said the move was unsurprising. “Since they passed Prop. 22 … there’s nothing holding them accountable for these changes.” In response to the Chronicle’s reporting, Gig Workers Rising, a group advocating on behalf of ride-hailing and food delivery drivers, tweeted: “Is there a single Prop. 22 promise that Uber hasn’t broken?” alluding to Uber’s history of misleading claims during its Prop. 22 campaign.
Because of a drop in demand for rides and a concern among drivers about getting sick throughout the pandemic, there has been a shortage of Uber and Lyft drivers. And with fewer drivers on the road and Uber drivers specifically being able to freely reject unprofitable rides, they’re driving up their own wages. In turn, this means higher prices and longer wait times for passengers — and Uber isn’t happy about that.
According to Campbell, Uber, Lyft, DoorDash, and other platforms are offering huge incentives to drivers — like $250 bonus for completing 20 rides — as they struggle to get them back on the road. “If Uber is going to be able to get away with paying drivers like independent contractors, I think that’s kind of some of the control that they have to give up and find a way to make work,” he concluded.