California Cracks Down on Uber and Lyft
by John Lawrence
California lawmakers have passed a historic bill - AB5 - which would reclassify Uber and Lyft drivers as employees instead of independent contractors. The bill now sits on the Governor's desk, and he is said he will sign it. This means that, as of January 1, 2020, Uber and Lyft drivers would be employees. Of course, this will cost Uber and Lyft a lot of money. For starters they will have to pay half of its drivers' social security - the employer's part. What a lot of people don't know is that self-employed people have to pay both the employer's and the employee's social security. You can write off most everything else, but you can't write off social security. For someone who has been self-employed for over 40 years, I'm acutely aware of this phenomenon. It's the government's way of discouraging self-employment or entrepreneurialism, something they tout as the hallmark of capitalism and the American way.
Next Uber and Lyft will have to pay workman's comp insurance, sick leave, unemployment and disability insurance. The law states:
It is also the intent of the Legislature in enacting this act to ensure workers who are currently exploited by being misclassified as independent contractors instead of recognized as employees have the basic rights and protections they deserve under the law, including a minimum wage, workers’ compensation if they are injured on the job, unemployment insurance, paid sick leave, and paid family leave.
Uber and Lyft have said that, if the law passes, they will have to limit the flexibility that has been a hallmark of gig work and put drivers on shifts. This will effectively end the current state of affairs in which drivers can work for both Uber and Lyft having both apps on at the same time and accepting a ride from whichever app gives them a ride first and then turning the other app off for the duration of that ride. Imposing shifts on drivers will make it impossible for drivers to set their own schedules. For instance, I usually drive 3 hours in the morning, take a 4 hour break during which time I go to the YMCA and either swim or work out followed by lunch and then an hour nap. Then I go out on the road for another 3 hours. I do this 5 days a week taking Monday and Tuesday off. Imposing shift work on me will effectively end my driving career.
The act specifically states: "Nothing in this act is intended to diminish the flexibility of employees to work part-time or intermittent schedules or to work for multiple employers." However, we'll see about that. It doesn't penalize companies who take this flexibility away either. Uber and Lyft maintain that 90% of its drivers work part time. In the final analysis Uber and Lyft will get to decide how AB5 affects its drivers. The bill is expected to add 20% to 30% to the ride sharing companies' costs. And both companies are losing money as it is. Uber reported losing a whopping $5.2 billion in the second quarter of this year while Lyft reported losing $644 million. But don't worry. Even though Uber and Lyft are losing money on each ride, they will make it up on volume! And maybe, just maybe, they shouldn't be sinking millions of dollars into perfecting autonomous vehicles and other less worthy adventures.
Taxis are also catching up. Forbes reported:
For almost a decade, ride-hail platforms like Uber and Lyft have cornered a service consumers demand: the ability to book rides through an app. In response, professional taxis have increasingly turned to similar platforms to help bring their industry and customer pool up to speed.
These include apps like MyTaxi, Cabify, and Taxi.EU, plus dozens of worker-run platform cooperatives serving passengers around the nation and world.
Here in the ride-hail revolution's home country, one of the most popular taxi apps is Curb, designed to let users hail licensed cabs and Access-A-Rides, book flat-rate or per-mile rides in advance, and pay for ongoing taxi rides.
So taxis are getting smarter. You can't hail an Uber or a Lyft, but you can hail a cab. You can't phone Uber and Lyft, but you can phone for a cab. Ditto for web based hailing. Have taxis finally surged ahead of Uber and Lyft? Uber and Lyft are competitors, always competing for both drivers and riders. So far Uber is winning, but they've also been around longer.
Let's see if Governor Newsom signs the bill as written or if it gets sent back for more tweaking. It would be nice if full time Uber and Lyft drivers had employee protections. As for me, the main thing I like about being a driver at the present time is the flexibility it affords. It fits in with my retirement lifestyle, brings in some money and gives me something to do so I'm not stuck in my house like a lot of other retirees.
