Uber reveals March bookings were the highest in company history as ride-hailing rebounds from the pandemic

GettyImages 1176816141 (1) NEW YORK, NEW YORK - SEPTEMBER 24: Dara Khosrowshahi, CEO, UBER, speaks onstage during the 2019 Concordia Annual Summit - Day 2 at Grand Hyatt New York on September 24, 2019 in New York City. (Photo by Riccardo Savi/Getty Images for Concordia Summit)
Uber CEO Dara Khosrowshahi.

  • Uber saw record demand for its ride-hailing services in March, it said Monday
  • The company also hit another record for its delivery services.
  • Uber faces some difficulty finding drivers to meet post-pandemic demand for its services.
  • See more stories on Insider’s business page.

Uber on Monday revealed record bookings for the month of March 2021, fueled by an resurgence in travel as pandemic restrictions around the world slowly begin to slip away.

The company, which lost nearly $6.8 billion last year, said in a regulatory filing that March bookings were up 9% month-over-month to the highest level in company history. As a result, the company believes it can still become profitable by the end of 2021 on an adjusted EBITDA basis.

Uber’s ride-hailing service was hit hard by the pandemic last year as lockdowns diminished the need for trips, a rut that was in large part buttressed by an intense focus on food delivery. Uber’ Eats also set a record last month, spiking over 150% year-over-year and hitting a record annual run rate of $52 billion last month.

Read more:Uber is battling DoorDash to rule food delivery. These are the steps Uber’s CEO is taking to topple Eats’ biggest rival.

The increase in booking in the past month has been largely fueled by optimism surrounding increased vaccination in the US and could be a sign things might be starting to return to normal.

“As vaccination rates increase in the United States, we are observing that consumer demand for Mobility is recovering faster than driver availability, and consumer demand for Delivery continues to exceed courier availability,” the company said.

Uber’s stock rose on the news of a rebound in recovery on Monday, climbing as much as 4% in early trading Monday following the disclosure.

The need for ride-hailing services is also setting up a potential shortage of drivers for Uber and competitors like Lyft.

Just last week, Uber announced that it plans to spend $250 million on incentives and guarantees for drivers. The move is a part of an effort to get more drivers back on the road following a shortage caused by the COVID-19 pandemic.

“In 2020, many drivers stopped driving because they couldn’t count on getting enough trips to make it worth their time. In 2021, there are more riders requesting trips than there are drivers available to give them-making it a great time to be a driver,” Dennis Cinelli, the head of Uber’s US and Canada ride-hailing business, said in a blog post.

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Uber gave drivers more control to prove they’re independent. Now the company is taking back control because drivers actually used it.

GettyImages 1176816141 (1) NEW YORK, NEW YORK - SEPTEMBER 24: Dara Khosrowshahi, CEO, UBER, speaks onstage during the 2019 Concordia Annual Summit - Day 2 at Grand Hyatt New York on September 24, 2019 in New York City. (Photo by Riccardo Savi/Getty Images for Concordia Summit)
Uber CEO Dara Khosrowshahi.

  • Uber is revoking California drivers’ ability to set prices and see trip destinations in advance, the San Francisco Chronicle reported.
  • Uber gave drivers more control in 2020 to avoid reclassifying drivers as employees under AB-5.
  • But it reversed course after Prop 22 exempted it from AB-5, saying drivers turned down too many rides.
  • See more stories on Insider’s business page.

In late 2019, California lawmakers passed AB-5, hoping to make it harder for companies like Uber to skirt labor laws and offload healthcare and unemployment insurance costs to taxpayers by misclassifying workers as contractors.

But Uber refused to comply, arguing that AB-5 didn’t apply to its drivers because they aren’t core to its business and that drivers really are independent because they’re “free from the control and direction” of Uber.

In an attempt to prove its independence argument, in January 2020, Uber gave California drivers more control by allowing them to set their own prices for rides and see passengers’ destinations before picking them up.

Regulators and courts didn’t buy it. But fortunately for Uber, a $200 million PR campaign around Proposition 22 successfully persuaded California voters to exempt it from AB-5, saving the company as much as $500 million per year, according to a 2019 estimate by Barclays analysts.

Now that Uber no longer needs to convince California authorities that its drivers are independent, the company plans to reclaim control, revoking the price-setting and passenger destination features it gave drivers barely a year ago, the San Francisco Chronicle reported Monday.

Uber’s reason for the reversal?

Too many drivers took advantage of the control Uber gave them, picking the most profitable rides while declining others, making it harder for customers to get rides and hurting Uber’s business, the company said. According to the Chronicle, one-third of drivers turned down 80% of rides.

Industry observers said the move is hardly surprising but it undermines Uber’s claim that the changes were ever about anything more than dodging regulation.

Uber did not respond to a request for comment on this story.

“It really shouldn’t be a shock to anyone,” Harry Campbell, who runs The Rideshare Guy, a popular blog among drivers, told Insider. “Since they passed Prop 22… there’s nothing holding them accountable for these changes.”

Campbell said that drivers likely won’t be happy given the popularity of the price-setting and passenger destination features, but added, “It’s kind of, unfortunately, a bit of a pattern that Uber specifically often gives drivers some things that they want and then ends up taking them away.”

“Is there a single Prop 22 promise that Uber hasn’t broken?’ Gig Workers Rising, which advocates on behalf of ride-hailing and food delivery drivers, tweeted in response to the Chronicle’s reporting, alluding to Uber’s history of misleading claims during its Prop 22 campaign.

But by revoking some driver-friendly features, Uber – which has yet to turn a profit – also revealed some of its post-pandemic priorities.

Companies like Uber and Lyft rely on flooding the market with drivers, who then face pressure to accept lower-paying rides and risk another driver getting the job or getting penalized themselves for turning down too many rides, even if those rides are unprofitable.

But during the pandemic, there has been a massive shortage of Uber and Lyft drivers, due to a drop in demand for rides and a concern among drivers about getting sick (the companies don’t provide healthcare or sick pay). And even as rider demand returns, many drivers are still staying home.

With fewer drivers on the road and Uber drivers able to freely reject unprofitable rides, they’re driving up their wages. That means higher prices and longer wait times for passengers, which Uber isn’t happy about.

“The companies, strangely, they care more about reliability than profitability at this moment in time,” Campbell said. “They want to make sure that the platform is working like everyone expects and if drivers are ignoring 80% of requests, that means that it literally is going to take longer for you to get matched with a driver.”

Campbell said Uber, Lyft, DoorDash, and other platforms are offering huge incentives to drivers – like a $250 bonus for completing 20 rides – as they struggle to get them back on the road.

As with past promises, those incentives and other driver-friendly features could just as easily disappear if the market becomes saturated with drivers again and companies regain the upper hand, but Campbell said that there needs to be a middle ground.

“If Uber is going to be able to get away with paying drivers like independent contractors, I think that’s kind of some of the control that they have to give up and find a way to make work.”

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Uber ordered to pay $1.1 million to blind passenger who was denied rides 14 separate times

GettyImages 577083258  DENVER, CO - JULY 18: Mike Hess, who is blind, get a ride from an Uber driver after his lunch meeting in Cherry Creek, July 18, 2016. Hess relies heavily on Uber to get around. (Photo by RJ Sangosti/The Denver Post via Getty Images)
A blind passenger gets into an Uber in Denver, Colorado (Lisa Irving not pictured).

An independent arbitrator on Thursday ordered Uber to pay $1.1 million to a blind passenger for illegally discriminating against her after its drivers refused her rides on 14 occasions.

The arbitrator also rejected Uber’s argument it wasn’t liable for discrimination by its drivers because they’re contractors.

Uber said it strongly disagreed with the ruling.

Lisa Irving, a San Francisco Bay Area resident who is blind and relies on her seeing-eye dog, Bernie, to help her get around, brought the claim against Uber in 2018 after “she was either denied a ride altogether or harassed by Uber drivers not wanting to transport her with her guide dog,” according to the arbitrator’s ruling.

Uber drivers left Irving stranded late at night, caused her to be late to work (which eventually contributed to her getting fired), and on two occasions, verbally abused and intimidated her – and that the discrimination didn’t stop even after she complained to Uber, her lawyers told Insider in a statement.

“Of all Americans who should be liberated by the rideshare revolution, the blind and visually impaired are among those who stand to benefit the most. However, the track record of major rideshare services has been spotty at best and openly discriminatory at worst,” Catherine Cabalo, one of Irving’s attorneys, said in the statement.

“The bottom line is that under the Americans with Disabilities Act, a guide dog should be able to go anywhere that a blind person can go,” Cabalo added.

“We are proud Uber’s technology has helped people who are blind locate and obtain rides. Drivers using the Uber app are expected to serve riders with service animals and comply with accessibility and other laws, and we regularly provide education to drivers on that responsibility. Our dedicated team looks into each complaint and takes appropriate action,” Uber spokesperson Andrew Hasbun told Insider in a statement.

But the arbitrator found Uber employees who investigated possible incidents of discrimination were “trained … to coach drivers to find non-discriminatory reasons for ride denials” and even to “‘advocate’ to keep drivers on the platform despite discrimination complaints.”

Under the Americans with Disabilities Act, it’s illegal for transportation businesses that are subject to the law to refuse to transport people with guide dogs, but Uber tried to shift the blame to its drivers, arguing it wasn’t responsible for any ADA violations because its drivers are independent contractors.

The arbitrator disagreed, ruling Uber was also liable for ADA violations because of its “contractual supervision over its drivers and for its failure to prevent discrimination by properly training its workers.”

However, classifying drivers as contractors is a strategy that has allowed Uber to avoid legal liability in other contexts, such as when a pedestrian alleged that she nearly lost her leg after being struck by an Uber.

The strategy has also allowed Uber to avoid paying drivers’ health insurance, sick pay, and unemployment insurance, shifting those costs to taxpayers – who paid $80 million last year to keep Uber and Lyft drivers afloat during the pandemic, making the companies one of the largest beneficiaries of a subsidy program aimed at small businesses.

Uber, Lyft, and other ride-hailing and food delivery companies have aggressively fought efforts in multiple states and countries to reclassify drivers as employees, which would add significant additional costs to their already unprofitable business models. Earlier this week, UK-based food delivery company Deliveroo’s initial public offering tanked by 30% after investors expressed concerned about how it had exploited its drivers.

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Court rules Uber and Lyft must face worker-misclassification lawsuit from Massachusetts’ attorney general

Uber Lyft

A Massachusetts state court on Thursday rejected requests by Uber and Lyft to dismiss a lawsuit accusing the companies of illegally misclassifying their drivers as independent contractors.

The lawsuit, brought by the Massachusetts state attorney general Maura Healey in July, alleged the companies have denied drivers benefits and workplace protections guaranteed to employees by instead classifying them as contractors.

Uber and Lyft then asked the court to toss the case, arguing the state hadn’t done enough to prove drivers were denied benefits and that there wasn’t a legitimate legal dispute over the issue. The court denied both companies’ requests, allowing the case to proceed.

Uber and Lyft did not respond to requests for comment on this story, while labor and driver groups praised the ruling.

“This court order is a complete rejection of Uber and Lyft’s position and a big win for working people,” Massachusetts AFL-CIO president Steve Tolman told Insider in a statement.

“Every worker should be able to earn a decent wage, take care of their health, and protect against harassment and discrimination on the job. We thank Attorney General Healey and her team for holding Uber and Lyft accountable for following the same rules that apply to every other company,” Tolman added.

The two ride-hailing giants have faced an increasing number of legal challenges in recent years over how they classify workers amid growing evidence many drivers are paid less than the minimum wage, and have struggled – particularly during the pandemic – without access to health care, labor protections, and unemployment benefits guaranteed by law to employees.

While companies are typically required to pay into state and federal programs benefiting their workers, Uber and Lyft have passed those costs on to taxpayers. A recent Washington Post analysis found more than 27,000 Uber and Lyft drivers received a combined $80 million from the US government to help them get through the pandemic.

The companies have argued drivers should be considered contractors because they’re able to choose when they can work and which rides they accept, claiming the companies are simply technology platforms that connect drivers and riders.

But a UK court recently rejected that argument, finding Uber and Lyft exercise significant control over drivers – much like a traditional employer – by setting their rates, assigning them rides, and using a rating system to determine their ability to get work on the platform. Uber responded by reclassifying its drivers as “workers,” a category under UK law between employment and contractor, in order to head off further legal disputes with drivers.

California regulators and courts also rejected the arguments put forth by Uber and Lyft, but the companies – along with a coalition of food-delivery companies including DoorDash and Instacart – avoided having to comply with those rulings by spending a combined $200 million to persuade voters to pass a law they wrote that keeps drivers as contractors.

The companies have also spent record amounts on lobbying as the worker classification issue takes the national stage.

The Biden administration’s proposed PRO Act, which wouldn’t automatically reclassify gig workers but would make it easier for them to unionize, has elevated the discussion around which rights and benefits rideshare and food-delivery workers should have – and who should bear those costs.

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Lyft stock gains 6% as company marks best week for rides since the start of the pandemic

Lyft employee
  • Lyft shares picked up as much as 6% early Wednesday following an upbeat February-trends update. 
  • Rideshare volume toward the end of February had its best week since pandemic lockdowns began in March 2020. 
  • Lyft forecast an adjusted EBITDA loss of $135 million, which is narrower than its previous loss projection of up to $150 million. 
  • Visit the Business section of Insider for more stories.

Lyft stock rose early Wednesday after the company said it’s logged its strongest period for rides in nearly a year, since the US began a wave of lockdowns to curb the spread of COVID-19.

Ridesharing volume in the week ended February 28 “was the company’s best week since March 2020,” Lyft said in a February business update released late Tuesday.

Lyft shares rose as much has 6% in heavy, premarket volume to fetch $60.49 each. The stock so far this year has gained 16% and has climbed by nearly 42% over the past 12 months.

The update highlighted broadly held expectations that business conditions throughout the country will improve as COVID-19 vaccinations accelerate. More than 78 million people in the US have already received the vaccine, according to figures from the Centers for Disease Control and Prevention.

As well, economists have said direct fiscal stimulus payments to Americans have helped bolster spending. The US Senate is considering passing a $1.9 trillion stimulus package following its approval in the House last week. A $900 billion coronavirus relief bill was finalized in December.

Lyft said average daily rideshares in February increased 4% month over month. Excluding the week of February 21 during which severe weather storms hit a number of states, average daily rideshares were up 5.1% compared with January’s volume.

The company expects ridesharing volume beginning the week ending on March 21 to show positive year-on-year growth. “This growth trend is expected to continue through the duration of 2021 barring a significant worsening of COVID-19 conditions,” said Lyft in its filing with the Securities and Exchange Commission.

It also said it “can manage” its adjusted EBITDA loss to $135 million in the first quarter. That figure is narrower than its previous projection of a loss between $145 and $150 million.

The company plans to release financial results for the first quarter ending March 31 in early May.

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You can now book a Lyft ride without using the app – just like a taxi

lyft sign
Lyft.

  • Lyft rides in select Florida cities can now be hailed over the phone, like a taxi.
  • Instead of using the app, customers can call 631-201-LYFT to book a ride through a Lyft agent.
  • The new option is “perfect” for seniors or people who can’t use the app, the company says.
  • Visit the Business section of Insider for more stories.

Lyft is taking a page out of the taxi playbook by letting people in select Florida cities call for a car instead of using the Lyft app.

The new feature allows passengers to book an on-demand ride by speaking to a Lyft agent at 631-201-LYFT between Monday to Friday from 8 a.m. to 8 p.m. Processes that are needed to hail a Lyft car through the app can then be completed over the phone. This includes making the credit or debit card payment, and verbally agreeing to health protocols implemented during COVID-19.

Instead of tracking the trip’s progress through the app, Lyft will then text its Call A Lyft Ride passengers with ride information and a tracking link that can be shared with other people.

According to Lyft, this new ride hailing option is “perfect” for seniors and people unable to use the app in Florida cities like Boca Raton, Orlando, Miami, and Fort Myers. You can find the full list of eligible cities on Lyft’s website.

This isn’t Lyft’s only app-less ride hailing option: passengers can also request a ride through ride.lyft.com. Like Call A Lyft Ride, users who’ve booked a car through the website will receive texted updates about the journey.

Uber, Lyft’s larger competitor,  has also previously explored bookings off of the app. In 2019 it introduced kiosks in Toronto’s Pearson International Airport, allowing passengers to call an Uber car without using their smartphones.

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A year into the pandemic, Uber and Lyft drivers say gig companies are still failing them. They blame Prop 22.

GettyImages 1218814557 NEW YORK, NY - APRIL 14: A driver pauses as city employees fill-up cars with take-away meals to be delivered to the elderly and those that can not leave their housing due to the coronavirus at a community center in Brooklyn on April 14, 2020 in New York City, United States. The National Guard joined other New York City city agencies in loading up taxi's, Uber's, Lyft's and other 'for hire' vehicles which have joined the effort in delivering meals across the city. New York has been the hardest hit city in the nation from the COVID-19 outbreak. (Photo by Spencer Platt/Getty Images)
Rideshare and food delivery drivers working for companies like DoorDash, Uber, and Instacart have complained the companies aren’t providing PPE or pay for the time it takes them to properly clean their vehicles.

  • Uber and Lyft rideshare and food delivery drivers plan to protest Wednesday at Uber’s headquarters.
  • They say the companies won’t provide PPE or pay them for the time it takes to clean their vehicles.
  • San Francisco supervisor Matt Haney plans to propose a law that would require companies to do both.
  • Visit the Business section of Insider for more stories.

Rideshare and food delivery drivers are planning to protest Wednesday outside Uber’s headquarters in San Francisco, California, over what they say is gig companies’ continued failure to protect them nearly a year into the COVID-19 pandemic.

Drivers for Lyft, Instacart, Uber, and Uber subsidiary Postmates said in a press release announcing the protest that the companies aren’t providing adequate PPE and have refused to pay them for the time it takes to clean their vehicles.

They said that Proposition 22 – an industry-backed law passed in California in November that classified rideshare and food delivery drivers as contractors, excluding them from certain labor protections and restricting the ability of local governments to regulate gig companies – is largely to blame.

“Eleven months into this pandemic and workers are still asking for the most basic life saving protections for themselves, their families and their communities,” Cherri Murphy, a Lyft driver and organizer with Gig Workers Rising, a co-organizer of the protest, said in a statement. 

“It’s really stressful – I’m always being timed when I’m driving for these companies and if I don’t get places quickly, I can be punished. It’s like the companies don’t care about making sure I have enough time to wash my hands, clean my car, and wipe down surfaces,” Lucas Chamberlain, Instacart driver and member of We Drive Progress, another group behind the protest, said in a statement.

Under Prop 22, drivers aren’t paid for the time they spend waiting for Uber or Lyft to find them a ride or delivery order or sanitizing their vehicles in between jobs. Some gig economy researchers have estimated that loophole could allow companies to pay drivers for just 67% of the hours they actually work. 

“Since the COVID-19 crisis began, Lyft has provided tens of thousands of face masks, cleaning supplies and in-car partitions to drivers at no cost to them, and continue to provide access to these supplies today. Our most active drivers also received a free safety kit, consisting of a reusable cloth face covering, sanitizer and disinfectant,” a Lyft spokesperson told Insider, adding that Lyft doesn’t profit off PPE.

Uber told Insider that it has allocated $50 million toward safety supplies for drivers and said it has provided 30 million masks and other cleaning supplies to drivers worldwide.

But while California law requires most companies to provide PPE and sick pay to their employees and to pay into the state’s unemployment insurance program, Prop 22 classified drivers as contractors, allowing gig companies to save far larger amounts by not having to cover those costs. Uber and Lyft drivers last year claimed they’re owed $630 million in back pay as a result of the misclassification. One study found that between 2014 and 2019, the two companies should have paid $413 million into California’s unemployment insurance fund.

Uber spokesperson Kayla Whaling told Insider the company “has tried to do everything we can to support [independent contractors] while they support our communities, including distributing PPE free of charge, providing financial assistance for those who were diagnosed with COVID-19, helping connect them to new work opportunities on Uber or elsewhere, and consolidating information to help them apply for PPP loans or federal unemployment assistance.”

Still, Uber hasn’t always delivered on those promises, and when it has, it’s often only done so following backlash from drivers, regulators, courts, or the media.

Insider reported last April that, despite Uber’s claims it would pay drivers who tested positive for COVID-19, the company had denied legitimate claims and even locked out drivers who requested sick pay.

In July, a federal judge in New York ruled that Uber and Lyft had delayed the state’s ability to pay drivers unemployment benefits because they had played “games” with its requests for earnings data.

Wednesday’s protest – which Gig Workers Rising and We Drive Progress said will include a socially distanced rally – comes as some lawmakers in California are already pushing for more accountability for gig companies who rely on rideshare and delivery drivers.

San Francisco supervisor Matt Haney said he plans to introduce legislation that would require companies like Uber and Lyft to provide PPE and pay drivers for time they spend cleaning their vehicles.

“In the midst of this devastating pandemic, workers have gone above and beyond to protect themselves and our communities by purchasing protective equipment and cleaning supplies and spending their personal time sanitizing their cars to save lives. It is outrageous that while delivery app corporations continue to rake in profits, workers are forced to shoulder these burdens while struggling to make ends meet,” Haney said in a statement.

Do you work at Uber, Lyft, or another food delivery or rideshare app company? We’d love to hear how your company is navigating challenges brought on by the pandemic. Contact this reporter using a non-work device via encrypted messaging app Signal (+1 503-319-3213), email (tsonnemaker@insider.com), or Twitter (@TylerSonnemaker ). We can keep sources anonymous. PR pitches by email only, please.

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Lyft CEO Logan Green predicts US will reach ‘critical immunity levels’ faster than many international markets

GettyImages 466529926 AUSTIN, TX - MARCH 16: Logan Green, CEO & Co-Founder of Lyft speaks onstage at 'Fixing Transportation With Humanity And Technology' during the 2015 SXSW Music, Film + Interactive Festival at Austin Convention Center on March 16, 2015 in Austin, Texas. (Photo by Amy E. Price/Getty Images for SXSW)
Lyft CEO Logan Green speaks at the 2015 SXSW festival in Austin, TX.

  • Lyft CEO Logan Green said the US will reach “critical immunity” faster than many other countries.
  • Lyft told investors Tuesday that it will be EBITDA-profitable in 2021 if the recovery continues.
  • The US still has one of the worst COVID-19 outbreaks, but has higher-than-average vaccine rates.
  • Visit the Business section of Insider for more stories.

The US currently has the worst COVID-19 outbreak globally, with more than 27 million active cases.

But Lyft CEO Logan Green is still optimistic about the country’s road to recovery which, not coincidentally, will have a major impact on his company’s own post-pandemic recovery.

“While we can’t predict the timing or efficacy of vaccine rollouts with certainty,” Green told investors during Lyft’s earnings call Tuesday, he said that, “based on current trends, we believe the US could reach critical immunity levels earlier than many international destinations.”

A spokesperson for Lyft told Insider Green’s comments were based on research from Goldman Sachs and news sources including Bloomberg, which estimates it will take the US nine months to vaccinate 75% of its population – the amount some experts have said is needed to reach herd immunity.

Unlike Uber, its biggest competitor, Lyft has focused primarily on its ride-hailing business and limited its operations to the US and two Canadian provinces.

That has left Lyft particularly vulnerable to failures by the US to slow the spread of the virus, which have caused the economic recovery to lag as well, particularly for the travel and transportation industries.

Lyft reported on Tuesday that, during the fourth quarter of 2020, rides on its platform were still down 51% from the same quarter the previous year, while revenue was down 44%.

Read more: Uber and Lyft driver earnings compared: Data reveals which app pays better in NYC, LA, Chicago, and 13 other major American cities

But Green said “pent-up demand” in the US could lead to a “pop in leisure travel” that Lyft could capitalize on, and the company doubled down on its expectation that it will be profitable on an adjusted EBITDA basis by the end of the year.

However, that trajectory depends on rides bouncing back at a “high single-digit month-over-month growth rate beginning at the start of the second quarter,” CFO Brian Roberts said on the call.

Green said those recovery trends vary across the US, with the West Coast being “the weakest region” while Florida and Texas have fared better.

Most states are seeing improvements, and the US is vaccinating people at a fairly high rate compared to most other countries, but there’s still a long way to go.

Additionally, while the stock market has soared recently on companies’ surprise profits, driven largely by the tech industry, experts have warned the broader economy could take years to recover and individual Americans are still struggling.

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Uber and DoorDash are hiking food delivery and rideshare prices for Californians to pay for new driver benefits

DoorDash Biker
DoorDash Biker

  • Uber and DoorDash are raising prices on customers in California in order to pay for new driver benefits guaranteed under Proposition 22.
  • Uber will introduce a flat fee between $0.30 and $2, while DoorDash will slightly increase its service fees. 
  • Drivers will still receive substantially fewer benefits under Prop 22 — a law written and bankrolled by Uber, DoorDash, and other gig companies — than they would have been under the state’s gig work law, AB-5.
  • As a result, the companies’ labor costs won’t increase as much, meaning they likely won’t increase prices as much for consumers, at least initially.
  • Visit Business Insider’s homepage for more stories.

Uber and DoorDash are raising prices for customers in California in order to pay for new benefits guaranteed to rideshare drivers and food delivery couriers under a new statewide law that’s set to go into effect this week.

Uber said Monday it’s introducing a flat fee per purchase that will vary based on customers’ location and the service – between $0.30 to $1.50 for rides and between $0.99 and $2 for Uber Eats deliveries.

DoorDash, rather than a flat fee, will roll out slightly higher service fees starting Wednesday, and may adjust certain promotions, such as DashPass, that could also lead to higher prices, a spokesperson told Business Insider.

The surcharges are intended to help cover the costs of minimum earnings, per-mile expenses, healthcare stipends, accident insurance, and other benefits that rideshare and food delivery companies will soon be required to pay workers.

Those perks became enshrined in California law after voters in November passed Proposition 22 – a controversial law that Uber, DoorDash, Lyft, Instacart, GrubHub, and Postmates authored and spent more than $200 million trying to pass.

The law exempts companies from having to provide rideshare and food delivery drivers with basic employment benefits guaranteed to other Californians under the state’s gig work law, AB-5, and denies certain labor protections to those workers.

Read more: California voters approved Proposition 22, keeping ride-share and food delivery drivers as contractors – here’s what that means for companies like Uber, Lyft, Instacart, DoorDash and their workers

That’s a major victory for rideshare and food delivery companies, which were facing substantially higher labor costs under AB-5 – Uber and Lyft gained a combined $13 billion in market value following Prop 22’s passage. Under Prop 22, those companies are required to provide a smaller array of benefits and often at a lower cost than what they would have had to under existing laws. 

For example, drivers will soon be guaranteed 120% of the minimum hourly wage, but they are only paid for “engaged” hours when they have an active ride or delivery, not the hours they spend returning from long trips or waiting for Uber or DoorDash to match them with a job. According to one study, that could result in drivers not being paid for up to a third of their day.

Drivers will also be compensated $0.30 per-mile for vehicle expenses during engaged time, just half of the $0.58 that the IRS estimates it costs to operate a vehicle per mile. Healthcare subsidies are similarly tied to engaged time and lack significant benefits that come with typical employer-based healthcare.

After AB-5 went into effect this year, Uber, Lyft, and other companies refused to reclassify drivers as employees as required by the law, meaning they never provided the benefits it guaranteed.

As a result, while the partial benefits guaranteed by Prop 22 will cost companies less than those guaranteed under AB-5, they are nonetheless new costs the companies hadn’t previously incorporated into their pricing – thus, the new surcharges from Uber and DoorDash.

Uber has yet to turn a profit in its more than 10-year history, and while DoorDash turned a surprise $23 million profit during the second quarter of 2020, the company said that it expected costs to increase and that it “may not be able to maintain or increase profitability in the future,” which may help explain why the companies are passing off part of these new costs to customers.

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