Uber is Testing a New Feature in California Allowing Some Drivers to Set Their Own Fares
Ride-hailing giant Uber has been under pressure in the state of California and elsewhere to classify its drivers as employees rather than independent contractors. Now Uber is trying to appease California lawmakers and protect its public image by allowing some drivers the ability to set their own fares at three California airports.
The rollout of the new feature was first announced by the Wall Street Journal.
Uber announced on Tuesday its testing a feature that allows some drivers picking up passengers from airports in Santa Barbara, Palm Springs and Sacramento to charge up to five times the fare set by the company, Uber said.
Uber is hoping the change will help it show that its drivers are independent contractors rather than employees under state law.
The initial tests are limited to these three airports and do not represent a final version of the feature, Uber said, adding that ways that can drivers' control over their earnings will evolve in the coming weeks and months.
In a statement, Uber said it has made these and several other product changes to preserve flexible work for its drivers since California's new law designed to improve working conditions in the gig economy went into effect this year.
"We're now doing an initial test of additional changes which would give drivers more control over the rates they charge riders," Uber said in a statement.
Under the new program, drivers can increase the costs of rides in 10% increments. When a rider requests a vehicle, they will be matched with the driver with the lowest cost, while drivers that hike fares are matched as demand increases.
Response to Assembly Bill 5
Assembly Bill 5 or AB5, which was signed into law by California Governor Gavin Newsom in Sept, 2019, went into effect on Jan 1, 2020. It requires app-based transportation companies like Uber, Lyft and food delivery company DoorDash to classify full-time drivers as employees. Under AB5, full-time Uber drivers are fully protected by U.S. labor laws.
AB5 requires employers like Uber doing business in California must pay Social Security and payroll taxes, unemployment insurance, and state employment taxes, while providing workers' compensation insurance and complying with minimum-wage laws.
Uber acknowledged in its S-1 filings that identifying their workers as contractors is key to their business models.
Uber however, which is still struggling to become profitable as a public company, said in its IPO filing that classifying its drivers as employees will "seriously damage its business." Uber has long argued that it doesn't run a transportation business and considers itself a software-based platform and a tech company, therefore its drivers, or its business model, are not covered under AB5.
While being able to set their own fares may benefit some drivers, riders will pay more as a result, especially during peak times. Passengers looking for a ride during peak demand may see their fares double or even triple from what their accustomed to.
Uber refers to this as "surge pricing", when fares suddenly spike during times of high demand, such as a sporting event or concert, where hundreds of people may be requesting an Uber ride at the same time.
However, beginning next week, drivers will have the ability to charge less than Uber's rates if the company implements surge pricing at times of high demand.
After AB5 was signed by Governor Newsom in September, Uber released a statement saying the company was pursuing several legal and political options, including working with Lyft and other Internet platform companies to lay the groundwork for a statewide ballot initiative in November 2020 to exempt the two ride-hailing companies from classifying drivers as employees.
Hours before the law went into effect, Uber filed a lawsuit in federal court in Los Angeles on Dec, 31, 2019 against the state of California and state Attorney General Xavier Beccera, asserting that AB5 is unconstitutional.
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