Uber rides are changing in California for both drivers and passengers as the ride-hailing company works to strengthen its defenses against AB5, the new gig-work law that makes it harder for companies to claim that workers are independent contractors rather than employees.
On Wednesday morning, Uber emailed 150,000 California drivers and millions of California passengers to alert them to the overhauls.
The company is giving drivers more control over their rides and making fares more transparent — which could mean passengers find that some types of trips get rejected more frequently.
The changes seek to establish that drivers are running independent businesses because AB5 offers some exemptions for business-to-business relationships.
Uber explained the changes as “due to new state laws,” in a letter to riders that included a warning that those laws could hurt them.
“These changes may take some getting used to, but our goal is to keep Uber available to as many qualified drivers as possible, without restricting the number of drivers who can work at a given time,” the company wrote. “We want your Uber experience to be excellent, and fewer drivers on the road would mean a more expensive and less reliable service for you.”
Uber, which loses money at a rapid clip, is intent on keeping drivers from becoming employees, which could add some $500 million a year to its labor costs, according to an estimate from Barclays. Uber says that drivers being employees would destroy the flexibility that both its business model and its drivers rely on.
The company is battling AB5 on multiple fronts. It’s collaborating with rival Lyft as well as delivery companies DoorDash, Postmates and Instacart on a $110 million initiative campaign, asking voters to keep their drivers and couriers as independent contractors entitled to some benefits and wage guarantees. Along with Postmates, it sued California last month, claiming that AB5 is “irrational and unconstitutional.”
“This is Uber’s fallback position — giving drivers more independence so they can be viewed more as separate companies in (business-to-business) relationships with Uber,” said Michele Ballard Miller of San Francisco law firm Cozen O’Connor. “The problem is that each individual driver would have to hit all the” requirements to qualify for an exemption.
AB5 author Assemblywoman Lorena Gonzalez, D-San Diego, reacting to a Washington Post article that said Uber had run a secret internal task force to devise ways to shield it from the new law, characterized the company in a tweet as flip-flopping from defiance to “‘Oh, wait, we will change our business model to try to fit AB5.’”
Gonzalez introduced placeholder legislation to clarify AB5 on Monday, but she’s adamant that there will be no changes to let Uber and Lyft off the hook.
Here are the new policies for Uber rides:
Pricing: Passengers will now see an estimated price range, rather than a firm fixed price when they request a trip. Prices will still be calculated based on the existing time and distance rates.
Uber drivers will receive exactly what passengers pay, minus the company’s commission, which is now capped at 25%. In addition, the company collects a flat-rate, per-ride “marketplace fee” for connecting riders to drivers. That fee, which varies by city, is $2.80 in San Francisco. Their payments will flow directly into their accounts rather than going to Uber first.
Previously, if the fare estimate was too low or too high, Uber either ate or pocketed the difference. That resulted in situations where a passenger might pay $20 for a trip, for instance, but a driver received only $10, irking drivers who shared such examples on social media.
“A lot of drivers have complained about the split Uber takes on fares,” said Harry Campbell, an Uber/Lyft driver who runs the Rideshare Guy blog. “Simplifying that fare structure and coupling what passengers pay to what drivers receive is good for transparency.”
Upfront trip info: Drivers will now see a trip’s time, distance, destination and estimated fare ahead of time, and can reject ride requests without penalties. (They can still be penalized for accepting rides and then canceling them.)
“That’s exactly what drivers have been asking for for years,” Campbell said. “It gives you all the information to make an informed decision.”