Uber and Lyft are discussing licensing their brands to operators of taxi fleets in California as both ride-hailing companies face pressure to reclassify their drivers in the state as full-time employees, as required by A.B. 5, a new California law that intends to ensure employee benefits for gig workers, the New York Times reported, citing sources.
According to the report, the companies believe that such a franchise-like model would allow them to keep an arms-length association with drivers in the state, circumventing the requirement to employ them directly or pay for their benefits.
- Lyft has reportedly already presented the plan to its board of directors, while Uber already operates under a similar model in Germany and Spain.
- The ride-hailing companies are yet to commit to such a plan as they wait to see how California’s legal situation around drivers plays out first, the report added.
- A.B. 5—designed to reclassify gig workers as employees with minimum wage protections and employment benefits—went into effect in January, but Uber and Lyft have refused to comply with it arguing that they are simply providing a tech platform and are not a transportation business themselves.
- In May, the state had sued both companies to enforce the law, and this month a San Francisco Superior Court judge ordered the companies to employ their drivers by Thursday.
- Both companies have appealed the decision and warned that they may have to shut down operations in the state if the order was not reversed.