News, Press 6 Min Read

Ride Sharing Industry Faces a Shake Up As California Rules Reclassifies Drivers As Employees

Written by Melissa Yap

The Best and Worse Case Scenario

The on demand industry drives our daily lives, but a California ruling is set to turn this upside down. Companies like Uber, Lyft, Postmates and Doordash have spent collectively between $180 to $190 Million dollars fighting Proposition 22 on the California ballot. This currently classifies drivers of such app-based transportation and delivery companies as “independent contractors”, but may soon need to be reclassified as employees under the new ruling.

SteelHouse CEO Mark Douglas, joined financial news network anchor, Nora Ali, to discuss the implications of this ruling on app-based companies like Uber and Lyft, “It looks like a big social experiment that will be conducted in the middle of a pandemic, [where] individuals will be a guinea pig.” According to Douglas, there is a best case and worst case scenario. The former scenario would potentially force lay offs in their driver network and drive up the price of ride shares for consumers, but the latter may cause a shutdown of these services entirely in the state of California. Whichever scenario eventuates may have a ripple effect across other states.

Is There a Middle Ground?

This latest ruling impacts the entire ecosystem, where layoffs and benefits for reclassified drivers will ultimately pass onto the users. “It’s not just the companies who have an incentive, but the users who have an incentive to keep the system the way it was,” says Douglas.

However, it’s not all doom and gloom – there is a middle ground, especially for the driver network. Some drivers are looking forward to the benefits and consistency that an employee/employer relationship would provide. By pooling together resources, “Uber and Lyft could create a benefits solution for these drivers – like access to healthcare – where drivers get to choose their benefits but get the combined buying power of these companies together.”