Lyft an Uber unite for protest against new California legislation
The ride sharing companies are calling their drives to strike as California introduces new law.
Ridesharing giants Uber and Lyft are threatening to close their operations in California this week through November in response to the state's extensive labor law that would turn drivers into employees and crush both companies under the burden of payroll taxes. The law, AB 5, passed last September, makes it more difficult for gig economy firms to continue treating their workers as contractors rather than employees. As employees, drivers would be entitled to basic labor rights such as minimum wages and social benefits, including paid time off. Last week a California judge issued a restraining order to the state to prohibit companies from continuing to classify their drivers as independent contractors. The companies that are already not making a profit have a week to appeal, and if they are not successful, their drivers must be reclassified as employees. Following the ruling, Uber cautioned it could raise prices by up to 111% to offset the increased cost of providing services to drivers. In a statement, Uber wrote that higher prices would, of course, reduce demand for trips, which would shrink the supply of jobs for drivers. "We estimate that the lower demand would result in a 23-59% decrease in journeys in our California markets, with the greatest impact in the sparsely populated areas." Lyft said California accounted for 16% of its total revenue. The last resort for companies should they lose in court would be to vote on their proposal 22, which was set for early November. During this time, they hope that California voters will help them fight the law. Proposition22 defines app-based transport and delivery drivers as independent entrepreneurs and thus essentially defies the AB5 Act. It would also include labor and wage policies, including an income limit of 120% of the minimum wage. Uber and Lyft claim that most drivers prefer their business model because of the flexibility and the ability to set their own working hours. On the other side of this divide, authorities and unions claim that it deprives drivers of benefits such as health insurance and workers' compensation insurance. And the two carpooling companies aren't the only ones affected by the law. Other gig economy companies, including food delivery platforms like DoorDash, Instacart, and the over-owned Postmate, are also affected. According to Ballotpedia, the proposal will be backed by DoorDash, Lyft and Uber with $ 30 million each, while Instacart and Postmates are each contributing $ 10 million. Almost 17% of the American workforce is, according to the U.S. Bureau of Labor Statistics Giants. However, Gallup.org estimates that 36% of the US population are in "nontraditional work". That's about 56 million people who make up the gig economy - nearly 30 of whom do this as a full-time job. The effects are enormous. The California case could have far-reaching implications for gig economy legislation elsewhere, and bills like AB5 could spill over into the other states. Last week, Seattle authorities announced that starting January next year, carpooling companies operating in the city would be receiving $ 16.39 an hour, plus compensation for gasoline, car insurance and maintenance. In July, the Massachusetts Attorney General sued the ridesharing agencies for misclassifying workers. According to the lawsuit, Uber and Lyft falsely classified their drivers as contractors rather than employees in an attempt to save millions of dollars in compensation. Last November, the New Jersey Labor Commissioner fined Uber $ 649 million in unpaid unemployment insurance contributions as a result of improper driver classification.