Uber Proposes Minimum Wage for Drivers to Combat California Bill Classifying Them as Employees

The Associated Press
Richard Vogel/AP

Uber has proposed to pay its drivers a new hourly minimum wage of $21, but a union affiliate representing the company’s drivers remains critical, as the proposed hourly wage would only apply while drivers actually have passengers in the car or are in route to pick someone up. The proposal is to counter a California bill classifying drivers as employees instead of independent contractors — which analysts believe could bankrupt rideshare companies.

The ride-sharing service, Uber, has offered its drivers a minimum wage of $21 per hour in response to a California bill that may become law and potentially bankrupt the company — as well as its competitor, Lyft — according to a report by Business Insider.

The report added that the hourly $21 minimum wage would only apply while drivers are on a ride or in route to pick someone up, which leaves a union affiliate representing some Uber drivers critical of the proposal, as driving a passenger or being in route makes up 63 percent of drivers’ time, according to a 2018 study by former New York City transportation official Bruce Schaller.

“The devil is in the details when it comes to calculating pay and expenses and the real take home pay being offered here is much, much lower than $21 per hour,” claims a representative for the union group Independent Drivers Guild, which represents Uber and Lyft drivers in New York. “California drivers are right to view this pay rate offer with heavy skepticism.”

Uber sent an email to its California drivers and riders on Wednesday, elaborating on the company’s proposal to give drivers the benefits that they have been protesting for in recent years, according to Business Insider.

“Uber is advocating for a brand-new policy that would strengthen protections for rideshare drivers by Ensuring drivers would earn a minimum of approximately $21 per hour while on a trip, including the costs of their average expenses,” read a portion of the email.

“Providing drivers access to robust new benefits, such as paid time off, sick leave, and compensation if they are injured while driving with Uber Empowering drivers to have a collective voice with rideshare companies, and the ability to influence decisions about their work,” continued Uber in its email.

The California bill — Assembly Bill 5 — would reclassify some of Uber and Lfyt’s independent contractors as “employees” — as long as the drivers pass a three-part test. The new legislation could result in costing the companies an estimated $3,625 per driver each year in California alone, according to equity research analysts at Barclays.

“Any wide-scale reclassification of drivers to employees would be a material negative for ride-hailing and further put into question the long term profitability of the industry,” said the analysts, who added that the government regulations would likely raise Uber’s annual operating loss by $508 million and Lyft’s by $290 million.

“A 25% increase in driver wage/benefit costs would essentially drive take rates to zero (absent rate increases to riders),” said the analysts, according to Business Insider. “We think an adverse ruling on the contract workforce issue would potentially bankrupt both Uber and Lyft.”

You can follow Alana Mastrangelo on Twitter at @ARmastrangelo, on Parler at @alana, and on Instagram.

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