San Francisco’s Public Safety and Neighborhood Services Committee met last Friday, June 28, to discuss a resolution on a proposed bill requiring Uber and Lyft to classify their drivers as employees instead of independent contractors. The bill was proposed in California and is named Assembly Bill 5 (AB5).
During the committee hearing, drivers shared their experiences — emphasizing on lower pay, higher costs, and longer work hours. One of the main concerns raised was the exclusion of benefits due to the drivers’ employment status.
Edan Alva, a Lyft driver, emphasized that since the ride-sharing companies value a high number of rides, drivers tend to sacrifice their health to reach a target for extra money. Alva emphasizes, “Since Lyft’s incentives have traditionally been tied to [a] number of rides, rather than time on the road, I’m encouraged to push myself to the limit.”
Four supervisors of the committee attended and agreed to support Uber and Lyft drivers’ cause. Committee Chairman and Supervisor Rafael Mandelman said, “I was thinking about the arrogance of people a decade ago that promised disruption, and boy have they delivered. In large part relying on a business model that dismantles more than half a century of advances in worker protections.”
Uber and Lyft’s business model is providing technological service by connecting customers and drivers via their apps. In the current situation, both companies are not subject to the management of drivers. The companies do not need to pay for benefits and do not directly control the drivers’ (or their cars’) performance.
The AB5 is not only advocating for Uber and Lyft drivers to be classified as employees. All independent contractors, sometimes known as gig workers, will have a change of employment status. As an employee, workers will be eligible for minimum wage, overtime pay, and workers’ compensation protections such as healthcare or sick leaves.
Introduced by Assembly Member Gonzalez, the AB5 passed the California State Assembly last May 29. Senate hearing for this bill is scheduled on July 10.
Uber and Lyft uniting against AB5
Uber CEO Dara Khosrowshahi, Lyft CEO Logan Green, and Lyft President John Zimmer wrote an op-ed piece for the San Francisco Chronicle last June 12 to discuss the issue. They emphasized that a flexible work schedule is an essential feature in their working relationship with their drivers. A feature that their drivers are highly satisfied with their service.
They wrote: “Some have proposed turning independent workers into employees in the belief that this would solve their challenges. But reclassification misses two important points: First, most drivers prefer freedom and flexibility to the forced schedules and rigid hourly shifts of traditional employment; and second, many drivers are supplementing [the] income from other work.”
Instead of AB5, Khosrowshahi, Green, and Zimmer propose to update employment laws in favor of work flexibility over job security. They also favored the forming of a new association instead of allowing drivers to form unions. Instead of unions, they proposed to create a new driver association that partners with state lawmakers and labor groups to represent the drivers’ interest.
Towards the end of their op-ed piece, they admitted that the change of their drivers’ employment classification would pose a risk to their businesses.
This is true. Should AB5 proceed, Uber and Lyft will be incurring additional labor and facilities cost. Aside from drivers’ compensation and benefits, maintenance of drivers’ cars may also be added to their operational costs.
Uber and Lyft’s Failed Public Offerings
Additional costs are something that Uber and Lyft cannot afford as of the moment.
Lyft had their IPO last March 29, selling at $72 per share. After two days, the ride-sharing company’s stocks took a dive closing at $69 per share. Since its first IPO, Lyft has not bounced back, even dipping below $50 per share in May.
Uber’s stock market performance is not looking good either. Uber debuted their public offering at $42 per share last May 10. Originally priced at $45 per share, it’s price dropped 7.6% on its first day. Its lowest price was at $37.10 last May 13.
Before their IPO debut, investors and analysts were expecting good performances on both tech companies. After both companies’ first-week stock exchange performance, investors and insiders were disappointed.
According to CNN Business, Uber is the number one company who lost the most money during the 12 months before its IPO. Lyft is the third one on the list.