California Takes Aim at Uber, Lyft and Gig Economy
California has just passed a law that will force ridesharing companies such as Uber and Lyft to reclassify their contract drivers and employees. According to Yahoo Finance, the new law provides what it calls an “ABC Test” to determine whether a contractor is an employee:
“A person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that the person is free from the control and direction of the hiring entity in connection with the performance of the work, the person performs work that is outside the usual course of the hiring entity’s business, and the person is customarily engaged in an independently established trade, occupation or business.”
The California Attorney General is tasked with filing suit if, in his or her judgment, a contractor has been “misclassified” and ought to be an employee with all of the benefits of being one, such as being paid a minimum wage, being paid overtime and being given health insurance. Those lawsuits have already begun.
The law is a direct assault on the gig economy in general and the ridesharing industry in particular. The one hopeful part of the law is the fact that drivers will not be automatically reclassified. Each has to go to court on an individual case by case basis. Nevertheless, companies such as Uber and Lyft which depend on hiring contractors to keep in business have vowed to fight and to push forward a ballot initiative to overturn the new law.
According to Ars Technica, the new law, if it survives, will have several consequences that neither drivers nor their customers will particularly like.
Some drivers may wind up being paid more, but a lot of others will be paid less as companies such as Uber and Lyft restrict their hours. Currently, a rideshare driver can log into the app to start accepting customers whenever and where ever she or he likes. Under the new law, rideshare drivers will likely be restricted to eight hours a day and certain high traffic areas. They will have been forced to trade away flexibility and autonomy for the higher pay rate and benefits. The law will heavily impact part-time drivers who might work around schedules for their main jobs, the idea being that they are using driving as a way to pick up extra cash.
Fewer drivers on the road mean higher prices for passengers and leas availability of rides, according to analysts. The beauty of using the ride-sharing app is that one can usually locate a nearby driver no matter where one is in the city and be able to summon him or her to get to where one has to be. That assurance will no longer exist. Plus, ride fares will skyrocket, shutting off the services of rideshare to many people with lower incomes.
Ridesharing has revolutionized the way that many people get around. The industry has provided more mobility options for the elderly, the disabled, and to people who, for one reason or another, do not own a car. The California law will threaten that newfound freedom for millions of Californians, even more, if other states start to adopt those rules. The law may well threaten the existence of ridesharing, choking off the new industry to the detriment of drivers and riders alike.
Some analysts of the ridesharing industry suspect that the law, should it stand, may accelerate the development of technology that will eliminate the drivers. The ultimate goal of ridesharing companies such as Uber and Lyft is to provide a service that uses driverless vehicles, programmed to whisk people from place to place with little or no human intervention.
Indeed, some futurists suspect that the ridesharing companies are working for a future in which very few people will own private vehicles. Instead, when they want to go to work or go out for a night on the town, they will summon a driverless car with a smartphone app and go. People will be liberated from the cost of owning a car, including buying fuel, insurance, and performing maintenance. A rideshare company will do all those things for people, according to the plans being developed by the industry.