Lyft are both considering licensing their brands to vehicle operating fleets in California to avoid classifying their drivers as employees. This change would allow the companies to continue not providing their drivers with benefits, in spite of the recent employee ruling against the two companies.
A California law, Assembly Bill 5, went into effect in January and requires Lyft and Uber to classify their drivers as employees. Lyft and Uber have previously considered their drivers to be freelancers rather than employees, which has allowed them to not offer traditional employee benefits to their drivers. Since the law came into effect, Lyft and Uber have continued to identify themselves as tech companies and not transportation businesses. California sued Uber and Lyft in May to forcibly require them to follow the new law and the courts ruled that Lyft and Uber need to begin offering benefits to employees starting on August 18. The two companies have appealed this decision, but if their appeal is not accepted they may have to pause operations in California for the time being.
Uber and Lyft have begun talks with operators of vehicle fleets that they could operate through. Uber has experience working alongside fleet operators in and Spain. Lyft is attempting to find a way for their drivers to remain independent and work when they want to, while also receiving an earnings guarantee and health care benefits.
What Does This Mean For Uber & Lyft Operations?
If Uber or Lyft choose to franchise their operations, they would invite other driving services to use their ride-hailing platform. This could also allow them to bolster their claims of only offering a tech platform that facilitates ride sharing. Lyft is basing its plan on FedEx, which allows local operators to deliver packages on some of its routes within this franchising model, whereas Uber is basing its plan on its operations in and Spain. The two companies are not understood to be collaborating on their similar franchising strategies.
Uber and Lyft are both losing Lyft’s business, and it is a major source of revenue for Uber as well. As a result, the two companies will continue to figure out a solution to maintain their foothold in California. This law could be a sign for future states to require benefits for Uber and Lyft drivers as well, and whatever method the companies choose in California to comply with, similar solutions might be implemented in those other states in the future.
Source: NYT