Uber and Lyft are ratcheting up the fight with the state government of California over the classification of drivers with a move that would discourage Californians from their ride-healing services (and driving income).
The news ride: On Wednesday, both companies said that if a court does not reverse or pause a new ruling that forces California drivers to classify as employees, they will suspend their services in the state until the November election, when voters could potentially release themselves by passing a poll.
Between the lines: Many critics suggested that the companies were bluffing, but I’m not so sure. A few reasons …
- The logistics are not trivial. They would need to figure out the needs of a workforce and a schedule, how many drivers they hire as well, and everyone on board.
- It is unlikely that the companies will want to continue all of the above, just to reverse course if they win in November.
- Receiving customers of these services she could get more November. The companies have in the past successfully turned customers into their political proponents.
- With demand for driving hail already significantly deflated, the extra decline in revenue is often something they are willing to swallow.
- Even if they could make these shifts quickly, it is unlikely that companies will want to give drivers a taste of employee life and the risk of sabotaging their mood swings.
- Lastly: They have done it before. In 2016, when Austin adopted new rules requiring driver fingerprinting, Uber and Lyft operations were halted and did not return until Texas overturned the rules a year later.
Why it matters: Only Uber and Lyft are party to this lawsuit, but several district and city attorneys – and regulators – are already suing other companies for gig economics like Instacart and DoorDash over the same law in California.
- What happens at the polls in California in November will have consequences outside of Uber and Lyft’s companies for driving.
- It could also affect the future of high-demand services such as food and grocery delivery, which have become critical for many Californians as the COVID-19 pandemic continues.
- (Uber also operates a food delivery company and recently agreed to acquire rival Postmates, which are widely popular in California cities such as San Francisco and Los Angeles.)
The finish line: Do not expect these companies not to pull all the stops to combat this.
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