In January, California passed a law that has the potential to significantly affect the bottom-line of the country's ride-sharing businesses. The law, known as AB5, aims to reclassify gig workers such as drivers for Uber and Lyft as employees. Currently, drivers for these companies are considered to be independent contractors and are therefore exempt from benefits such as health coverage, unemployment insurance, and workers’ compensation insurance.
Though the law was passed in January, the companies have failed to comply, arguing that due to their driver's ability to set their schedule disqualifies them from being part-time employees. The disagreement took a turn as California sued the companies, and now both Uber and Lyft are devoting close to $100 million in initiatives to get the law overturned.
Should the companies be forced to comply with the law, it is estimated that they would each face $392 million in payroll and workers' compensation costs. This, they argue, would have a domino effect of negative repercussions, such as: forcing them to significantly reduce their workforce in California, compelling them to pass a portion of the costs to consumers, and may even ultimately cause them to leave the California market altogether.
To Learn More Read: Uber, Lyft spend big in California to oppose even costlier gig worker law