An Uber and Lyft shutdown in California looks irreplaceable – unless voters reimburse them

No Uber and Lyft rides in California? After a judge rejected the companies’ attempt to delay an order that they classify drivers as employees, it seems immutable. Uber and Lyft must follow the order by August 20th. But the companies have said they need to get dark in the Golden State to re-establish their business.

The judges may not have the last word. Uber and Lyft are counting on California’s notorious mercurial voters to help them circumvent AB5, which went into effect in January, making it harder for businesses to use independent contractors. Uber and Lyft built their respective companies on the concept of using freelance drivers who are not eligible for traditional benefits such as health insurance and paid leave.

Earlier this year, the companies, along with DoorDash, raised nearly $ 100 million to put a question to the November vote. They succeeded, and this fall, voters will be asked to permanently classify ride-healing drivers as independent contractors. The measure, called Proposition 22, also encourages companies to adopt certain labor and wage policies that are lacking in traditional employment.

To achieve their political goals, companies advise their customers. Lyft emailed his customers urging them to vote yes on Prop 22 and pro-Prop-22 posts added to his app. Uber has done the same, but the company has shown a flair for using dramatic tricks to turn its customers into political allies. In 2015, the company added a pop-up feature to its app to troll the mayor of New York City and encourage the company’s customers to pressure him to go back on proposed legislation that undermines Uber’s growth efforts. can seriously hinder the city. It worked, and Mayor Bill de Blasio trusted.

It was a short life victory. Finally, the Blasio and New York City Council met to cut the number of new Uber and Lyft cars and create a payroll for drivers. New York State is now considering legislation similar to AB5 that would force companies to classify drivers as employees.

Photo by ROBYN BECK / AFP via Getty Images

Closing operations in California would be a much bigger, much more dramatic, and certainly much riskier move than adding a new widget to their app. But it would also be an extremely visceral way to show voters what things could be if Prop 22 fails.

Uber and Lyft drivers have long complained about poor pay, lack of protection and an inability to reconcile to negotiate collectively with the companies. There have been stories of drivers sleeping in their cars because they can not afford to live in the cities where they work, struggling to make an end, and feeling completely at ease. of a faceless algorithm that dictates when and where they ride How long.

Uber and Lyft have said they realize they need to adapt to changing attitudes about work in California, citing Prop 22 as evidence. The voting measure promises to increase compensation for drivers for driving and delivery by requiring companies to pay above minimum wage, plus 30 cents per mile, according to the companies. It would also require health care coverage for drivers who work at least 15 hours a week, and provide insurance for on-the-job injuries.

Voters in California are not only asked to pass on Uber and Lyft to classify drivers as self-employed contractors; they are also asked to distinguish an unprofitable business model that refuses employee severance pay, compensation for expenses, compensation of workers and paid leave, pro-AB5 groups say.

California is an obvious place for the line to be drawn in the sand. It’s where Uber and Lyft were founded and where they raised billions of dollars from investors before they finally went public. But none of the companies has ever been profitable. They have both set actual records for the amount of money lost in the run up to their respective IPOs. And since they went public, they have remained continuous.

“Prop 22 is not just an AB 5 security for gig companies,” said Carlos Ramos, a 39-year-old San Diego-based Lyft driver and member of the pro-AB5 group Gig Workers Rising. “It has also been designed by emerging companies to ensure that these corporations are exempt from the next generations of basic labor protection for workers.”

Uber and Lyft have said they realize they need to adapt to changing attitudes about work in California, citing Prop 22 as evidence. The voting measure promises to increase compensation for drivers for driving and delivery by requiring companies to pay above minimum wage, plus 30 cents per mile, according to the companies. It would also require health care coverage for drivers who work at least 15 hours a week, and provide insurance for on-the-job injuries.

AB5 asked Uber to make several major changes to its app: it now shows pricing differently, enables customers to select preferred drivers, and terminates benefits associated with their driver program. Uber CEO Dara Khosrowshahi recently advocated a “third way” for gig workers that offers more protection while maintaining the flexibility to set your own hours.

Khosrowshahi does not need to close Uber in California to make this point. Together with Lyft and DoorDash, his company has more than $ 110 million in cash that it can spend to weigh voters on Prop 22, according to CalMatters. By comparison, pro-AB5 workgroups have only $ 866,000. That could be enough to score a win.

A majority of voters in California said they plan to vote on the ballot, according to polling stations Redfield and Wilton. But they are divided on how they will vote: the poll found that 41 percent of voters say they will vote yes to Proposition 22, and 26 percent say they will vote no. In addition, a significant 34 percent say they do not yet know how they will vote.

Photo by Mario Tama / Getty Images

It is unclear how groups like Gig Workers Rising plan to make their case for voters. So far, they have been protesting at Uber and Lyft headquarters in hopes of generating some media attention. But they still need to create an advertising strategy.

In contrast, Uber and Lyft have money to spend on advertising, a direct line of communication to their customers, and a willingness to lose tens of millions of dollars more to make their point. Going dark in one of their biggest markets in the country to really drive the message home about what a stake a gamble might be worth. Uber lost more than $ 16 billion in the three years to its IPO. Since it went public, it has lost another $ 13 billion. By comparison, Lyft lost a moderate $ 2.6 billion in 2019, but its company is entirely based in North America, while Uber is worldwide.

What money both companies will lose closing a store in California could be pocket change compared to getting the laws repealed for work in the state.