Uber Says It May Shutdown In California As It Fights Against Gig Worker Law
Is it possible that you won’t be able to get an Uber or Lyft in California? Well, it’s actually very likely that your apps won’t work much longer. The two companies are threatening to go dark in the Golden State as the two fight back against AB5 – a state law that offers protections to gig economy workers.
Uber says that they’ll need to rethink their entire business model if forced to follow AB5, hence the likely shutdown. But many find it suspicious that the company will be shutting down through the November election, when voters will be asked to vote on Prop 22, a ballot measure that would exempt Lyft and Uber from the new regulations.
An Uber shutdown is looking more likely in California as the company plans its response to new state laws.
All the drama started when California (among some other states) started enacting ‘gig worker’ protection laws that were meant to force companies like Uber to reclassify drivers as employees. Currently, drivers are classified as ‘independent contractors’ and are not eligible to receive any benefits, such as healthcare, retirement plans, and overtime.
Uber moved to limit the impact of that law while also admitting that change was needed to better protect their drivers. Not too long after Uber CEO Dara Khosrowshahi published an op-ed in The New York Times with the headline “Gig Workers Deserve Better,” a San Francisco judge ruled that Uber and Lyft had to reclassify their drivers as employees within 10 days.
In his ruling, Schulman wrote of Uber and Lyft, “It is high time that they face up to their responsibilities to their workers and to the public.” He rejected the argument that Uber and Lyft are simply technology companies, asserting “drivers are central, not tangential, to Uber and Lyft’s entire ride-hailing business.”
Two days later, Khosrowshahi responded with an ultimatum: If Uber had to abide by California labor law, it would require a business model change so extreme the entire company would have to pull out of the state until November. Which is convenient, since California has an initiative in the November election that would overturn much of the state’s gig economy law.
The shutdown would be used to fight back against a recent gig economy law that Uber says would eat away at profits.
Over the last five years, several states have enacted legislation against Uber and Lyft’s operating methods. The companies have come to rely on a tried and tested playbook: threaten to suspend service in the area. The threat, which the companies would sometimes follow through on, appeared designed to rile up customers and drivers, and put more pressure on lawmakers. And it often worked: look at Austin, TX.
Now, both Uber and Lyft say they are once again considering suspending service to get what they want. They say they may suspend their operations in California as soon as this week while simultaneously pushing for a referendum in November to exempt them from the law, known as AB-5.
Although the pandemic has reduced demand, a shutdown would largely impact Black and Brown communities.
Although the companies are planning on going dark in the next week or so, many industry experts don’t think the shutdown will have the impact they hope for. The pandemic has greatly reduced demand for ride sharing as people are staying at home and many more are working from home.
However, much like the pandemic itself, the shutdown would likely have an outsized impact on Black and Latino communities – two groups who have largely come to reply on the companies for commuting to and from work or school. Several studies have shown that Black and Brown workers make up the majority of ‘essential workers’ – so many don’t enjoy the privilege of working from home.
An Uber or Lyft shutdown would force many of these workers back on to buses and trains, further putting already impacted communities under increased risk for contagion of the virus.
The companies are betting on a November ballot initiative to help bail them out from new regulations.
Although a judge has tried to force the companies to follow the law – the legal system may not have the last word. Uber and Lyft are counting on California’s voters to help them circumvent AB5, which went into effect in January and makes it more difficult for companies to use independent contractors. Uber and Lyft built their respective businesses on the concept of using freelance drivers who aren’t eligible for traditional benefits like health insurance and paid leave.
Earlier this year, the companies, along with DoorDash, raised nearly $100 million to place a question on the November ballot. They succeeded, and this fall, voters will be asked to permanently classify ride-hailing drivers as independent contractors. The measure, called Proposition 22, also directs the companies to adopt certain labor and wage policies that fall short of traditional employment.
To help build support, the companies are turning to their customers. Lyft has taken a very active approach with urging its customers to vote yes on Prop 22 – they’ve emailed them and added pro-Prop 22 messages to the app. Meanwhile, Uber is considering similar tactics to ones the company used in 2015 in New York, when the company added a pop-up feature in its app to troll the mayor of New York City and encourage the company’s customers to pressure him to back off on proposed legislation that could seriously hamper Uber’s growth efforts in the city. It worked, and Mayor Bill de Blasio relented.
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