Will Uber Suspend California Operations?
Uber Is THIS CLOSE to Suspending Operations in California.
Will that Open Any Doors for Us?
If you think you’re having a tough go at it, be glad you’re not at the helm of the big TNC’s of Silicon Valley these days.
Uber and Lyft, who are suffering a very bad 4 months in the state of California just can’t seem to catch a break. Assembly Bill 5, a new law which went into effect early this year prevents Uber and Lyft from classifying their drivers as independent contractors or freelancers. For several months thereafter, no enforcement happened as the state heard carve-out appeals for other “gigs” such as musicians, who got entangled in the Bill. Uber and Lyft also presented their case for exemption but were denied. This all went on last spring during the Covid-19 shut down that caused the mobility industry to completely stop. By May the lawsuits against the TNC titans were filed, first by Attorney General Xavier Becerra, along with city attorneys of Los Angeles, San Francisco and San Diego and another by California Labor Commissioner Lilia García-Brower.
The drama has ensued. This past Monday, California Superior Court Judge Ethan Schulman issued an injunction on Uber and its contemporaries, compelling them to change IO drivers into employees immediately – well actually they have 10 days. With no time to spare, Uber is heading back to court on an emergency appeal. At the same time, the TNCs in California have vowed to take AB 5 to the people and get it voted down at the polls this November in the form of Prop 22 (they want people to vote YES).
CEO Dara Khosrowshahi stated yesterday that, "We think the ruling was unfortunate. We respect, obviously, the law and the court and the judge," Khosrowshahi said. "If the court doesn’t reconsider, then in California, it’s hard to believe we’ll be able to switch our model to full-time employment quickly, so I think Uber will shut down for a while."
Stephanie Ruhle of MSNBC Live, asked Mr. Khosrowshahi how this this law would ultimately affect Uber’s business model. He replied, "You would get a much smaller service, much higher prices, and probably a service that's focused in the center of cities versus a bunch of the smaller cities or the suburbs that we operate in right now." Lyft stated they too would shut down operations if they were ordered to make the switch to the employee-based business model. Certify states that Uber’s market share within the business travel community is 12% of business expenses (by volume, not value) compared to a 3.5% Lyft market share. Their strongest revenue bases are here in California with San Francisco Bay Area at the top.
So, if the Rideshare companies of California suspend their operations, likely until the election in November, can chauffeured transportation pick up any of that business? Can we start a dialogue (finally) with the leadership of the TNC community and brainstorm on how we can help each other rather than kill each other assuming we’re moving to a more even playing field? If their numbers are to be believed, they generate 2.5 million trips per month in California so if Uber work is currently 75% off, that still means there is 25% that isn’t – or 625,000 monthly rides. If 15% of that is business travel related (our bread and butter) luxury transportation providers in California could reasonably pick up almost 100,000 trips per month. I contend that in a decimated mobility marketplace everything has to be put on the table. We may be catching a big break.
Stay Safe,
Sara Eastwood-Richardson
