To protest changes being rolled out by Uber and Lyft, more than a thousand Uber and Lyft drivers led a caravan that brought rush hour traffic in New York City to a virtual standstill. The direct action was carried out by workers with the Independent Drivers Guild (IDG), a labor group for app-based drivers, and stretched across the Brooklyn Bridge, from FDR Drive to Gracie Mansion (the residence of New York City's mayor).
On Tuesday, Uber rolled out new policies that will block drivers from accessing the app when and where demand is low. The policy brings the company in line with its competitor, Lyft, which made similar changes this summer. Both are attempts to avoid complying with the city's pay standards, which ensure a minimum wage of $17.22 an hour after expenses.
For months, there has been a concern that the ride-hail companies would try to circumvent New York’s pay standards. The IDG sent a letter to New York City’s Taxi and Limousine Commission (TLC) in June, warning that by using demand to justify blocking access to the app, "Lyft would be shifting the costs of travel and waiting time onto the drivers and in so doing, violate this commission's rules." In August, New York City adopted new ride-hail rules, despite intense opposition, that failed to account for Uber’s long history of flagrantly violating laws to preserve its business model.
This is a preview of what is to come in California, where Uber and Lyft have teamed up with DoorDash to spend $90 million on a ballot initiative designed to effectively overturn AB 5, a recently-passed bill that requires ride-hailing companies to reclassify their drivers as employees. Already, Lyft is emailing drivers warning that "[a]s a result of AB 5, you may soon be required to drive specific shifts, stick to specific areas, and drive for only a single platform.” Uber’s Chief Legal Officer Tony West responded by announcing that drivers aren’t “core” to their business and would not be reclassifying their contractors as employees, a strategy designed to buy the company time as it figures out its next step.
For a company that has never made a profit but is desperately trying to convince investors that they will see a return after a “train wreck” IPO, it needs all the help it can get. Refusing to pay drivers a living wage is, ironically enough, Uber’s best chance at staying alive. AB 5 alone is expected to cost the company $500 million each year in California (Lyft would lose over $290 million). Uber has also gone through two major rounds of layoffs across its marketing, engineering, and product teams and amended its tax structure by moving the shell company that owns Uber’s intellectual property from Bermuda to the Netherlands in an attempt to save $6.1 billion on future Dutch tax bills. Uber even changed how it celebrates hiring anniversaries—switching from helium-filled balloons to stickers should save the company over $200,000 a year.
On the other hand, it may be the case that not much can save Uber and Lyft here. Less than 24 hours after AB 5 passed, a class-action lawsuit was filed arguing for the state to force Uber to reclassify its drivers as employees. And unlike New York City, California may have more power to actually hold these companies to account. A last-minute amendment was added to AB 5 that empowers city attorneys statewide to sue companies that refuse to comply with the law
AB 5 isn’t the end-all-be-all of gig economy regulation, and there are still questions about what it will look like. But it’s the first step towards an industry where drivers are paid a living wage—whether these companies believe they deserve it or not.