Lyft Follows Uber In Threatening To Pull Out Of California
Lyft said in August that it will shut down operations in CA if the courts have to force the company to classify all their drivers as employees. On an earnings call on August 12, Lyft's senior executives announced that they are joining Uber in threatening to pull out of one of its biggest markets in the entire world.
At issue is the classification of ride-hailing drivers as independent contractors. Many drivers prefer the flexibility and ability to set their own hours for work and Uber and Lyft both use this reasoning to continue treating all their Drivers the same. This is clearly not the case for 100% of their Drivers because they have setup independent Driver organizations mimicing labor unions, forums, and facebook groups to discuss this issue in detail and come to a solution which works for everyone. The unions and elected officials of the state argue that their independent status deprives them of traditional benefits like health insurance and workers’ compensation.
There inevitably be a appeals process but if their appeals fail, Lyft will join Uber in completely withdrawing their ridesharing services from California almost immediately. Lyft's president said “If our efforts here are not successful it would force us to suspend operations in California,” and “fortunately, California voters can make their voices heard by voting yes on Prop 22 in November.”
Proposition 22 is a ballot measure signed and funded by 3 major gig-economy companies Uber, Lyft and DoorDash. Proposition 22 aims to override AB5 by classifying ride-hail drivers and other gig economy workers as independent contractors. The ballot measure is supposedly the backup plan for the three companies if their appeals process fails. The companies also fear that as California has influenced the rideshare laws of other states, this ruling could quickly be in affect nationwide.
If drivers were classified as employees, Uber and Lyft would be responsible for paying them minimum wage, overtime compensation, paid rest periods, and reimbursements for the cost of driving for the companies, including personal vehicle mileage. But as independent contractors, drivers receive none of these benefits and after COVID-19 both Drivers are desperate for better treatment and Uber to show a path to profitability.
The earnings call also gave an insight into the impact of the shutdown. the shutdown had continued to pummel demand for app-based ride-hailing in the second quarter and the company reported only $339 million in revenue in the second quarter, compared to almost $850 million in the same period in 2019. Lyft’s active ridership also fell 60 percent to 8.7 million active users this quarter compared to 21.8 million last year.
Most of Lyft's global operations happen in the U.S and their app also helps users book bikes, scooters and vehicle rental. Unlike Uber, Lyft does not have a food and grocery delivery business to support its losses during the COVID-19 shutdowns.
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