California Socialists Force Uber and Lyft to Destroy their Business Model

In a move that threatens to destroy the ride-sharing industry, California judge Ethan Schulman on Monday ruled that Uber and Lyft must classify their drivers as employees rather than contractors.

The ruling is related to Assembly Bill 5, a controversial measure that took effect on January 1st.

AB5 is designed to offer gig workers the same benefits California employees receive, including minimum wage, health insurance, paid time off, overtime pay, and reimbursement for mileage. Uber and Lyft have 10 days to appeal the ruling. 

Ride-sharing companies insist that drivers prefer the flexibility granted by their status as contractors, while labor unions and some elected officials argue that drivers should have the same benefits enjoyed by other employees. 

“Drivers do not want to be employees, full stop,” said a spokesperson for Lyft. “We’ll immediately appeal this ruling and continue to fight for their independence. Ultimately, we believe this issue will be decided by California voters and that they will side with drivers.”

“The vast majority of drivers want to work independently, and we’ve already made significant changes to our app to ensure that remains the case under California law,” adds a spokesperson for Uber. “When over three million Californians are without a job, our elected leaders should be focused on creating work, not trying to shut down an entire industry during an economic depression.”

Indeed, compliance with AB5 is likely to sink Uber and Lyft, as they will be unable to operate with the added costs. For drivers, the change is likely to produce higher taxes, fewer hours, and smaller paychecks – not to mention a whole lot of bureaucratic red tape that could send drivers in search of other jobs. 

Uber, Lyft, and Doordash have dumped more than $100 million into an effort to get Proposition 22 on the ballot in California this fall. Proposition 22 seeks to define app-based transportation and delivery drivers as independent contractors and to adopt labor and wage policies that are specific to the industry.

Author’s Note: The socialist lawmakers in California seem to think that just because Uber and Lyft were both founded in California, they can force the industry to change. Not only does AB5 threaten to end Uber and Lyft at a time when Americans desperately need jobs, but it also prevents competitors from entering the industry.