The business model of services such as Uber and Lyft, which is based on self-employed drivers, is hanging by a thread in home base California. A new bill can have consequences for the entire ‘gig economy’.
Ride-on services Uber and Lyft are investing millions of dollars in promoting a bill in the US state of California.
This is a local law, but because the local region is also the headquarters of many app service companies, the outcome may have consequences for the so-called ‘gig economy’ business model.
On the bottom line, app companies like Uber or Lyft must provide their drivers with health insurance and other benefits.
According to the government, yes. The state of California, where Uber and Lyft’s headquarters are located, wants both companies to treat their drivers as employees, so they have the right to overtime, health insurance, and other benefits.
Uber and Lyft disagree, but a judge approved the state in early August, after which the services threatened to stop their activities there wholly.
A few days ago it was decided in summary proceedings that the services may continue to work in the old way for a while.
That is a preliminary decision, however, and if things move forward as they do now, at some point Uber and Lyft will have to treat and pay their drivers like real employees, something the companies, both deeply in the red, do not like.