LOS ANGELES — An appeals court has allowed ride-hailing giants Uber and Lyft to continue treating their drivers as independent contractors while an appeal works its way through the court, giving reprieve to the rideshare services to continue operations in California.
Eearlier in the day, Lyft wrote an online blog post saying it would suspend its operations across the state beginning Thursday night. The San Francisco Superior Court gave Uber and Lyft until Thursday to abide by law AB5 and reclassify their drivers as employees.
Both companies previously said they could not meet the deadline and threatened to pull their services from the Golden State, at least temporarily, if forced to comply. And on Sunday, Lyft pushed out a text message to its users saying “rideshare is at risk of shutting down next week in California,” and urging passengers of its service to support Prop 22, the November ballot measure that favors a minimum wage and some health benefits for drivers but would keep them as independent contractors.
With all the political and legal wrangling over gig economy drivers’ employment status, a simple question seems to be lost: What do the drivers want?
Proponents of Prop 22 say app-based drivers prefer to be independent contractors by a four-to-one margin. But a comprehensive study of L.A. County ride-hail drivers, and the main activist group representing rideshare drivers in the city, indicate a preference for the employee status provided through AB5.
“Drivers want fair pay,” said Nicole Moore, a part-time Lyft driver and member of the leadership organizing committee for Rideshare Drivers United, an L.A.-based activist group with 17,000 member drivers. “Long-time, full-time drivers who’ve been doing this for five or six years will tell you, we used to make a really good living. But the business model, where drivers are paid well and passengers don’t pay too much, is now shifting to passengers pay a lot and drivers make very little.”
A 2018 study of ride-hail drivers in L.A. County from the UCLA Institute for Research on Labor and Employment found that rideshare driving was the only job for almost half of all rideshare drivers. About 50 percent of them reported driving 35 hours or more per week. Such full-time drivers tended to be older, were more likely to be immigrants, and were also more likely to be supporting families with children.
At issue in the debate between AB5 and Prop 22 is whether or not drivers should remain independent contractors, who are paid by the trip and responsible for all the vehicle costs they incur while driving for rideshare companies, including fuel and maintenance. Because the companies classify them as independent contractors, drivers are not guaranteed a minimum hourly wage, and they are not eligible for overtime pay, employer-provided health insurance, unemployment insurance, or any of the other benefits full-time workers are granted with employment status.
Rideshare Drivers United supports AB5, Moore said. The group does not support Prop 22, which seeks to put drivers in a new classification that falls short of U.S. labor protections. The proposition “is not coming from drivers,” she said. “It’s the fox writing the law for the hens.”
According to researchers at the University of California-Berkeley Labor Center, Prop 22 is intended to give drivers more protections while allowing Uber and Lyft to minimize labor costs, but it will only guarantee drivers $5.64 per hour, not $15.60 per hour, as Prop 22's proponents claim.
“What drivers want are the benefits that for the most part traditionally come with being an employee as opposed to an independent contractor,” said Jacob Lawrence Wasserman, research project manager at the UCLA Institute of Transportation Studies.
The 2018 UCLA rideshare study found that 56 percent of drivers would prefer to be employees – not independent contractors. The survey also found that 84 percent of drivers want workers compensation, 74 percent would prefer a retirement plan, 71 percent favor unemployment benefits, and 80 percent would like health insurance.
“Uber and Lyft and a lot of companies in the gig economy have never made a profit or very minimal profits at best,” Wasserman said. “They subsidize the rides through venture capital. Inevitably, Uber and Lyft were either going to have to raise prices in some form because they couldn’t just keep losing money, or they were going to come up with a driverless car” that negated the need to pay a human for their driving services.
As recently as three years ago, Uber and Lyft were both bullish about the imminent arrival of autonomous cars and a relatively fast transition to a self-driving fleet. But that technology has hit roadblocks, delaying the transition by years.
The pandemic has only added to the financial difficulties both companies are experiencing. Earlier this month, Uber reported that rides were down 50 to 85 percent in many major cities. Lyft reported its second quarter earnings were down 61 percent compared with the year prior.
Last week, on the same day a California Supreme Court judge issued a preliminary injunction ordering Uber and Lyft to comply with AB5 by August 20, Uber CEO Dara Khosrowshahi proposed a Working Together Priorities plan to give all workers who drive or deliver for gig companies new benefits and protections.
Specifically, it asked that states pass new laws requiring all gig economy companies to establish benefits funds that would allow workers to withdraw cash for things like paid time off or healthcare, and also provide medical and disability coverage for injuries incurred on the job.
Khosrowshahi said that making drivers employees would raise prices for passengers and lead to fewer drivers, resulting in a fundamental change in the way passengers experience the service.
Wedbush Securities estimates it will cost Uber $500 million and Lyft $200 million per year to comply with AB5, according to reporting from The New York Times.