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As the ridesharing part of the business is currently going through turmoil regarding the classification of its drivers and the company’s non-compliance of AB5, the food delivery service Uber Eats is largely unaffected.
Since the start of the coronavirus pandemic, Uber’s Eats business has seen a surge in demand. The demand for rides, on the other hand, has immensely decreased. Not to mention that along with Lyft, Uber has been fighting a lawsuit brought by California, San Francisco, Los Angeles, and San Diego regarding the classification of its drivers as independent contractors and not employees with the appropriate benefits.
Uber and Lyft had threatened to shut down in California after the lawsuit ruled against them, but the companies obtained a temporary reprieve from an appeals court. Both companies are now considering switching to a franchise model in order to escape AB5.
However, the lawsuit and its decision only applies to ride-hailing drivers and not food delivery workers. As people throughout California have been sheltering in place, many ridesharing drivers have switched to deliveries due to some people not being able, or simply not wanting to, pick up their own food or groceries.
For the first time in the company’s history, Uber Eats brought in more revenue ($1.21 billion) than rides ($790 million) in the second quarter of the year. Earlier this month, Uber Technologies Inc. reported a quarterly loss of more than $1 billion, as the COVID-19 crisis took a toll on its core business. Because of the effects of the COVID-19 pandemic, their revenue fell by 29%. Meanwhile, Uber Eats bookings more than doubled from last year, rising 103% to $1.21 billion.
Moreover, together with other gig-economy app companies like DoorDash, Instacart, Lyft, and Postmates, Uber has been pouring millions into a California ballot initiative up for voting in the November election. Proposition 22 would exempt gig economy companies from AB5, allowing them to continue classifying their workers as independent contractors while offering them some wage and benefit guarantees.
And while for the time being Uber Eats is unaffected by the court’s decision, the fight for the classification of food delivery drivers could be next. Earlier this summer, the San Francisco District Attorney sued DoorDash over classification of its delivery workers, asking for an injunction to force the company to comply with AB5. The trial is pending until Oct. Also, earlier this year, San Diego won a case against Instacart over the same issue, but the company is appealing.
On why there’s a difference between ride-hailing drivers and their food delivery counterparts, UC Hastings law professor Veena Dubal told Market Watch that though she believes delivery workers are also being misclassified, the “facts of the misclassification are different:” “It would be hard to litigate both sets of facts at the same time. I suspect, however, that the California attorney general will work to enforce the law against the food delivery business models in the coming months.”
