After Uber and Lyft repeatedly threatened to shut down at midnight this morning, a last-minute reprieve from an appellate court judge blocked them from needing to comply with AB5, a bill pushed by unions with the intent to force companies to pay better wages and provide better healthcare– a bill which has created tremendous backfire actually is reducing jobs and costing workers even more money.
“What is AB5 and why can’t companies just pony up the money?” is the obvious question– with not such an obvious answer.
Here’s the skinny: Uber and Lyft are locked horn-to-horn (see what I did there?) in a battle to the death on who can survive the longest in a game of “spend all the investors cash”. Currently, at the time of this writing, Uber is worth 30.83/share with a total market cap of $54.03billion. Lyft is worth 28.93/share with a total market cap of $9.03billion. Lots of money, right? Except this: Uber *loses*– not spends, but actually loses– about $5billion/quarter. Uber loses about $600m/quarter. These are not sustainable businesses, and are basically deadlocked in a game of chicken, hoping that the other dies first. You can do the math about which one is likely to die first. 🙂
Anyway, that means that even with all the massive investment, the companies themselves are still insolvent. They literally cannot even afford to pay their drivers what they are *already* paying them– California mandating higher wages, healthcare, and vacations is simply not in the car(d)s. (see what I did there?)
So eventually, the inevitable solution will be that if AB5 stays intact, Uber and Lyft will then *license* their application to drivers, who will then work at-will, meaning they will need to carry their own insurance, likely incorporate themselves as a business, and begin to pay additional taxes that businesses owners always complain about but employees don’t see– indeed, in the end, drivers will be making less money and dealing with more government headaches than they ever did before.
But this isn’t just true for app-based drivers– this is true for anyone who does work on the side for companies that require their services to operate (if it’s within their “Core Business”)– causing pain, unemployment, and surges of increased taxes on the working class throughout California.
Thankfully this has been put on hold for now– so you can still use Uber and Lyft. The judge’s order requires Uber and Lyft’s lawyers to both file consent with the current law and a promise to have their CEOs write a letter promising comply with the law as-is by the date of September 4th within the next 5 days. Otherwise, it expires. Once their CEOs do that, they still don’t need to comply if the miserable failure of a bill “Prop 22” passes in November, which would exempt *only rideshare drivers* from complying with AB5, while really harming all other employees for any other company. If Prop 22 passes in November, then Uber and Lyft must comply with AB5 no later than 30 days later. I am 90% sure I have everything in this last paragraph correct– but please read the judge’s words for yourself, using the link above.
And don’t drink and drive!