With lower rates, near-instantaneous pickups and flexibility, app-based ride-hailing companies such as Uber and Lyft disrupted the decades-old model of taxis and limousines.
These companies “have their place in the ecosystem,” said Robert Alexander, president of the National Limousine Association, which represents taxis and chauffeured ground transportation.
“But what we don’t understand is they get to operate under their own set of rules.”
In May, the California attorney general’s office and the cities of Los Angeles, San Diego and San Francisco sued the ride-hailing giants for not complying with the state’s worker law.
The AG then filed for an injunction to force the companies to reclassify their drivers immediately. The injunction was granted on Aug. 10.
Uber and Lyft threatened to temporarily shut down operations in the state if forced to provide drivers the benefits typically given to employees — which is largely the cause of public outcry against the companies.
While they were spared from having to immediately convert their California drivers to employees, the respite is temporary.
“There’s a whole list of things that are going to drive up [these companies’] labor costs extensively, and they would have to pass that on to the consumer or figure out where they are going to make up those costs somewhere else,” said Tia Koonse, legal and policy manager at the UCLA Labor Center.
The companies are still challenging a judge’s order to comply with the state labor law, and the appeals court decision may not come before that critical ballot measure is voted on.
The ride-hailing companies say service could be scaled back if they are forced to comply with the new labor law.
Uber’s current system “forces every worker to choose between being an employee with more benefits but less flexibility, or an independent contractor with more flexibility but almost no safety net,” Uber CEO Dara Khosrowshahi said in an op-ed in The New York Times last month.
He said Uber is ready to pay its drivers more, but only to an extent.
“Uber would only have full-time jobs for a small fraction of our current drivers and only be able to operate in many fewer cities than today” if drivers become employees, he said.
“Rides would be more expensive, which would significantly reduce the number of rides people could take and, in turn, the number of drivers needed to provide those trips,” he added.
“Uber would not be as widely available to riders, and drivers would lose the flexibility they have today if they became employees.”
Khosrowshahi said that instead, there needs to be broader change around the gig economy.
