8 min read

    8 min read

    We have written plenty about AB5 on RSG over the past year, but today RSG senior contributor Sergio Avedian takes a look at how AB5 is encouraging Uber to treat the drivers more like Independent Contractors (ICs).

    We’re in 2020, which means Assembly Bill 5 (AB5) is in effect in California. We have covered extensively what benefits and cons AB5 has brought to California drivers, and also discussed the impact destination discrimination may have on passengers. Many professional groups, including doctors, lawyers, financial advisors, real estate agents etc. received exemptions from the law, but Uber and Lyft failed to do so. However, Uber and Lyft are attempting to repeal AB5 has been well publicized in the mainstream media.


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    History of AB5 Since the Beginning of 2020

    First, Uber and Lyft said they would ignore the law all together since it did not apply to them, as they consider themselves a technology platform. In Uber’s case, this includes rideshare, e-bikes, scooters, freight, food delivery, helicopters etc. Uber and Lyft always contended that their drivers were independent contractors and not employees, but AB5 stopped this argument in its tracks.

    AB5 says that:

    • The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
    • The worker performs work that is outside the usual course of the hiring entity’s business.
    • The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

    Second, Uber and Lyft contend that changing the legal status of their drivers poses a fundamental threat to their businesses. Both companies stated they would spend $ 60 million on a ballot initiative that would essentially exempt them from the proposed law. After their announcement, DoorDash, the food delivery service, said it would contribute an additional $30 million.

    Third, two days before 2019 ended, Uber, Postmates and one driver for each service jointly filed a lawsuit in federal court in Los Angeles against the state of California and state Attorney General Xavier Beccera, asserting that AB5 is unconstitutional.

    With the legal battle lines drawn, what do you think? Will this be resolved in the court system? Will AB5 get repealed in one way or the other in 2020? Or is this just the beginning, with other states implementing their own versions of AB5?

    Uber Comes Out Swinging

    The last two months in 2019 were full of surprises from Uber. First they announced that they would be slowly rolling out a new ping screen to all drivers in CA with something everyone wanted from day one, passenger destination. Uber went one step further and announced that Acceptance Rates (ARs) were going away, and in fact they took that metric off the driver app immediately. Then, Uber said that the request screen would also show an estimate of what the driver will make for that specific trip as well as distance and duration.

    When I was just getting adjusted to all these changes, Uber dropped a second bomb in January 2020 by getting rid of flat rate surge in CA and bringing back the original surge multiplier. Rejoice drivers, unicorns are back! However, Uber did not stop there, as they added more information to the now tightly packed ping screen in the form of a tighter estimate of what the driver will make on a specific trip as well as a surge indicator.

    Let me also emphasize the cap on commissions Uber will take from the fare going forward. Uber announced drivers will get to keep 75% of what the passenger paid for the trip, with Uber taking anywhere from 20-28%. Uber also started charging riders a new Marketplace Fee (variable but $3 in most cases) for the privilege of accessing Uber’s technology platform.

    Finally, later in January 2020, Uber announced that in select small airports (Sacramento, Palm Springs, Santa Barbara) Uber drivers will be able to set the surge multiplier for their rides and increase or decrease the trip fare. Reminder, base rates are not changing from 60/21 in Los Angeles.

    At this point, it seems relevant to mention Sidecar. Do you remember Sidecar? It was around before Uber and Lyft came to town and crushed it to oblivion with their unlimited venture capital subsidies. I feel like I am in a time machine, and we’re traveling back in time with all these announcements. How many of you think all these seemingly positive changes would be taking place without the threat of AB5?

    But in typical Uber fashion, they took away the Quests (i.e. 40 rides for $40), which a lot of full time drivers depend on to boost their incomes, Uber also took away consecutive ride bonuses (CRBs) for morning and afternoon rush hour shifts.

    All this is good news for veterans like me and new drivers alike, but why? What is Uber doing? Why are they divulging this information, and why is Lyft just standing by?

    Do These Changes Really Make Drivers Independent Contractors?

    I have been discussing AB5 with my neighbor who is an IC plumber. Here are the similarities between us after all these changes and where they end!

    I hope I listed pretty much everything I could think of, if I missed anything, please chime in! Clearly, my neighbor is an independent contractor, but are we as drivers?

    Personally, I don’t think so. Will Uber drop another bomb and allow us to name the price for the rides all over the US? I am not sure the technology exists and how it could be done in an orderly fashion to facilitate up to four million rides a day in the US.

    Am I an Independent Contractor?

    As an Uber semi-IC driver now, I did a few rides last week and I must say, I enjoyed turning down every one of the trips in the following screenshots. Would I have taken some of them in the past without knowing the destination? Probably not, since I am a huge believer in quality over quantity (My AR has never gone above 25%). I rather do one ride an hour for $30 than three, let the legal cherry picking begin!

    After an early scheduled ride on Lyft to Los Angeles Airport (LAX), I positioned myself for the surge trips to roll in, practicing the PATIENCE part of the 3 P’s (Patience, Position, Planning). You no longer need to feel stressed about driving since we know where the passenger is going before accepting the ride!

    My first ride request was at 6:44 am. A seven minute to pick up for a 1.2 mile ride? I don’t think so, whoever took this ride should be kicked off the platform! No, thank you!

    My second ride request was at 6:46 AM, with a 10 minute to pick up. Without surge and with LAX’s insane traffic, no, thank you! Most drivers would take this ride and it will kill the morning shift.

    My third ride request came in quickly after the second. This is an odd one, as it came in only with the pick up and drop-off address. This ride had no surge and not enough information, so no thank you!

    The next ride request came in at 6:47 AM, with another ride to LAX. Small surge possibly a 1.2-1.3 range, no ride. Since you can tell, the multiplier is not showing up as it used to in the old days, we don’t really know what it exactly is unless you can do the math in about eight seconds (duration of ping) in your head to guess it.

    I have nothing against going to LAX for rides, but it just has to be the right price, that’s all! Then, since I declined four garbage rides in a row, Uber puts me in a quiet time out. While before I was getting request after request, all of a sudden my requests came to a dead halt! I have written about getting skunked by the Uber algorithm before, but I was unphased. I repositioned and then this gem showed up!

    The final ride request came on just after 7 am, and gave me surge into LAX. The hellhole I named before now is a golden destination! Accept the ping, check the passenger menu screen, it is a 2.5X. Let’s go, thank you!

    Below is what the final payoff was for my PATIENCE! Great payout for a 15 mile and 38 minute trip!

    My Take on Uber Turning Drivers Into Independent Contractors

    I think Uber is being smart here. Uber is hedging their bets by throwing a bone to the drivers in case everything else fails as far as their legal challenge is concerned. They are separating themselves from Lyft, at least for now. If Uber, Lyft, Doordash and Postmates are able to tie up AB5 in courts or repeal the law in its entirety, I doubt that Uber will be this generous with the trip information.

    Do all these changes make us true ICs? I definitely don’t think so! In all this, what is lost is the elephant in the room. Will drivers make more money because of this? I am not sure, but I will be testing it in a future article. However, turning down money-losing trips certainly feels great!

    What do you think? Are Uber drivers finally true ICs? What other changes need to take place for drivers to be in that category? Will this make drivers more money?

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    -Sergio @ RSG

    Sergio Avedian

    Sergio Avedian

    Sergio has been driving Uber and Lyft for about three years. He has over 4500 rides on both platforms, mostly on Uber. Sergio has a degree in finance, and worked on Wall St. for over eighteen years. In his free time, he still trades stocks and derivatives for himself and a few friends. He is also a PGA certified golf instructor, teaching golf is his passion. Sergio is married with two wonderful kids who take the rest of his afternoons/weekends between their soccer practices and golf tournaments.

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