Is the gig up for Uber and Lyft?

Ride-share companies like Uber and Lyft have faced plenty of criticism over the years, from crossing picket lines to increasing city congestion, but one of the major critiques of these companies is how they pay their workers–and it’s starting to come to a head.

See, recently, Uber and Lyft have been locked in a legal battle with California about whether or not they need to classify their workers as employees. These companies threatened to leave California as a result, prompting a pause on the legal orders, but what could this mean for the long-term?

Employees vs. Contractors

Before we dive into that, though, here’s a quick refresher on Uber and Lyft’s current employment structure.

Like many other sections of the growing gig economy, ride-share workers from companies like Uber and Lyft are typically classified as contractors, rather than employees. This means workers are left without benefits like health insurance and overtime, and are unable to apply for unemployment–which is especially tough given how badly COVID-19 has impacted many drivers’ incomes. 

Now, these companies will be quick to retort that their drivers prefer this system, often citing the flexibility contractors have to choose their own schedules. In fact, according to one Lyft spokesperson: “drivers do not want to be employees, full stop.”

I’m sure that statement has nothing to do with the fact that, in general, those who work for employee-based ride-share and delivery platforms tend to be better compensated.

The future in California

There is a chance companies like Uber and Lyft could leave California, but given how much money is made in the state, this course of action seems more like a threat than an actuality. 

There’s a possibility these companies will lay off current drivers in order to comply with the court order while still managing their profits. 

But it’s currently looking like these companies might need to pivot to a franchise model. In this scenario, a company like Uber would license their brand to a third party fleet, putting the responsibility of official employment (and the costs that come with it) on another company. 

Whatever is decided, it will be interesting to see how ride-share companies fare–and what it will mean for their workers.