The clock is ticking on a potential outage in California ride-healing service.
Uber and Lyft say they can end California’s ride Friday at 12:01 p.m. If so, they plan to keep cars off the road until at least November, when voters weigh in on Proposition 22, their voting initiative to keep their workers as independent contractors.
The potential halt comes from a lawsuit filed by the state of California and the city attorneys of San Francisco, San Diego and Los Angeles who say that Uber and Lyft are divulging the state’s legislation, AB5, by drivers as independent contractors to keep. The state won a temporary promotion that could force drivers to be reinstated as soon as Friday.
Meanwhile, the companies are engaged in a massive PR campaign, emailing passengers and riders about the grave threat and urging them to support Prop 22 to continue with services.
On Wednesday, the mayors of San Jose and San Diego required California courts and lawmakers to negotiate a resolution to keep the services operating. San Diego Mayor Kevin Faulconer and San Jose Mayor Sam Liccardo, a Republican and Democrat, respectively, said they were afraid of the impact on gig workers and riders.
“This sudden disappearance of jobs and transportation options will only deepen the economic pain in our communities during this historic pandemic and recession,” she wrote.
Conversely, Attorney General Xavier Becerra, who is leading the legal indictment against the companies, wrote in a brief submission Wednesday that they are trying to “prevent all the consequences of their collective years of misconduct.”
Here are answers to some questions about what’s going on.
Q: Why can Uber and Lyft ride with service on Friday?
IN: The drastic step is her response to a preliminary injunction that she was instructed to immediately classify her drivers as employees. Superior Court Judge Ethan Schulman issued the order on August 10, but it remained 10 days – until Thursday.
The companies have appealed the information and the appellate court asked to suspend the order while that appeal continues, which can take many months. If the higher appeal remains the mandate, service for riding dog will continue. If it refuses to do so, the companies say they will stop the service.
Q: What about Uber Eats?
IN: Uber’s service provider is not affected by the assignment and would continue service as usual.
Q: Why can Uber and Lyft just not comply with the dismissal?
IN: The companies say they could not possibly hire their tens of thousands of drivers as employees “on the flip side of a switch.” It is also likely that they do not want to appoint a president that shows that they can function under an employment model because many of their Prop. 22 argument is that drivers’ drivers can be almost impossible for their company.
Q: Could service outages be a low threat?
IN: They have done it before. The companies with rides pulled out of Austin, Texas in 2016, over a city requirement that they have fingerprint drivers, for example. They returned a year later to success with lobbying for a statewide law that they found more favorable.
Q: How big of a financial hit will this be on Uber and Lyft?
IN: Companies have already seen ride volumes drop during the pandemic, with consumers staying at home and drivers afraid of contamination. Their business is down about three-quarters.
Q: Would it really be too logistically difficult for them to hire the drivers?
IN: As Judge Schulman noted, they have had two years to prepare for this, since a California Supreme Court decision in 2018 called Dynamex made it more difficult for companies to classify workers as self-employed. The lawyers who sue them also point out that they already have an infrastructure to hire and pay their employees as employees.
Q: What do they not want drivers to be employees of?
IN: It’s a lot more expensive – all those benefits can add 30% to labor costs. Plus, companies prefer the flexibility of the freelance model and say that many workers do the same. With employment, ride prices would increase and services would be cut in many areas, they say. They say they have to switch to hiring full-time drivers and lock them in rigid shifts, punishing the legions of people who occasionally drive a few hours for extra income.
Q: Could she leave California for good if Prop. 22 fails and the lawsuit forces her to classify drivers?
IN: It is unlikely that they will permanently leave the most populous state of the nation, which accounts for a large portion of their income. California accounted for 9% of Uber’s world rides before the pandemic. It is even more important for Lyft, which does not operate abroad, except in Canada, and also has no other companies besides rides. California accounted for 21% of Lyft rides for the pandemic and now supplies 16% of its ride volume, it said last week.
Q: How would they be able to continue California service under an employment model?
IN: The companies are likely to investigate a fleet model, in which they will hire third parties who operate fleets to complete rides. The fleet operators would then be responsible for hiring drivers. Uber said this is comparable to its original Uber Black service “with higher prices and less reliability.” It is not certain that this would be livable in California. Lyft said it is focusing on 22 as the best solution for the state.
Q: Why is California suing companies?
IN: California regulators and union organizers say independent drivers and couriers for operators are being exploited with precarious work situations that lack the protection and benefits of employment. The new gig labor law in California, AB5, gives them ammunition.
Q: What do the companies want instead?
IN: Uber, Lyft, DoorDash, Postmates and Instacart have so far spent $ 110 million on Proposition 22, a November voting initiative that asks voters to keep their workers as independent contractors, but entitles them to some minimum wage and some benefits.
Q: What started it?
IN: A decision in Supreme California in California 2018 called Dynamex made it harder for companies to say that workers are independent contractors. The court relied on a strict ABC test in ruling that workers must be employees, except A, they work free from the control of a hiring entity ‘B, they perform work outside the ordinary business of the hiring entity; and C, they have independent companies doing that kind of work.
Q: What happened?
IN: Dynamex asked the California Legislature to pass AB5, a new gig performance law that went into effect Jan. 1. AB5 codified and explained the decision. Somehow AB5 has expanded Dynamex – applying it to aspects of employment other than just wage demands. In other ways, AB5 limited Dynamex – with a long list of professions such as architects, engineers, doctors and lawyers who were exempt from the ABC test.
Q: Why do Uber and Lyft say that AB5 does not apply to them?
IN: The companies both say they are “technology platforms” instead of transportation services. Their argument is that this means that drivers are not central to their business, and that they are therefore passing the crucial B-jump of the ABC test.
Q: Why can gig companies not hire workers and let them still have flexibility?
IN: Both AB5 and the Dynamex decision specifically state that companies can let workers set their own hours and reject or accept orders. The gig companies say they need schemes to make sure there are enough drivers when demand is high. They should also make sure that they are not forced to pay people who sign up in the small hours when there is no demand.
Q: Are there cities where companies work with drivers?
IN: New York introduced a minimum wage requirement for Uber and Lyft drivers last year. Lyft answered by only allowing drivers online if there is enough demand for rides in their area. However, these changes have been paused since the beginning of the coronavirus pandemic.
Q: Do gig workers want to become employees?
IN: Drivers for the gig companies are an enormous, scattered group. There are vocal drivers on both sides of Prop 22.. There is no method for drivers done with methodology to ensure that responses are representative of the driver population. However, the RideShare Guy, a media operation that includes a blog and a podcast, investigates drivers via email and social media channels. Of the 734 drivers who responded to his survey in May, 71% said they want to remain independent contractors and 17% said they want employees.
Q: What do drivers think about the possible suspension?
IN: While enormous numbers of drivers are currently not working due to the pandemic, there are those who are dependent on income. Drivers who Prop. 22 support, owe the possible break on AB5 and the state; drivers against Prop. 22 say it is a cynical maneuver by the companies.
Carolyn Said is a staff writer at San Francisco Chronicle. Email: [email protected] Twitter: @csaid
