Uber Technologies Inc. (NYSE:UBER) and LYFT Inc. (NASDAQ:LYFT) have found a way to circumvent California requirements that require them to classify drivers as full-time employees. The requirement is part of the State’s push to ensure the drivers are well remunerated in the wake of reports that most of them earn as little as less than $10 an hour on the deduction of costs.
California Assembly Bill 5
While Uber used to boast that its divers earn as much as $90,000 a year, it appears not to be the case. Drivers have always told a different story of low pay and wage cuts compounded by little power to demand better conditions. In response to the cries, California responded with an act that requires the two ride-hailing companies to classify freelance drivers as full-time employees as one of the ways of ensuring better pay.
Assembly Bill 5 is the new California law that grants employment benefits to gig workers such as Uber and Lyft drivers. The law proposes categorizing drivers as employees as long as their jobs are part of the companies core business, among others.
Uber and Lyft are yet to comply with the new law, which went into effect early in the year. The two insist that they are simply tech platforms and not in the transportation business.
The two ride-sharing services are willing to go to great lengths to ensure they don’t classify drivers as full-time employees as they would incur more on benefits. Reports indicate that the two are considering licensing their brands to operators of vehicle fleets in the state. Such a structure would resemble an independently operated franchise allowing the two companies to control drivers and not pay additional benefits.
Media reports indicate that Lyft has already tabled the plan to its board of directors. The company’s spokeswoman says they are considering a number of alternatives, one of which could see drivers remain independent and able to work whenever they want to work. Likewise, they would receive additional health and care benefits and earnings guarantee. Uber, on its part, is still working on the framework having already deployed the franchise strategy in Germany.