New California Independent Contractor Rule Means More Transportation Discrimination

I used to get in taxis all the time in New York. But before the driver would let me in he’d (and it was always a he) roll down the window and ask where I was going. He didn’t want a ride in the opposite direction of where he wanted to go, and he certainly didn’t want to drive into an ‘undesirable’ (minority) neighborhood. That’s illegal, but the practice was commonplace.

Uber and other rideshare companies changed all that. You enter where you’re going in an app, the driver accepts the ride, but doesn’t learn the destination until you’re in the car and on the way – and they can be penalized for cancelling rides.

That’s all going to change in California, with new independent contractor rules bringing back transportation discrimination.

  • California’s new independent contractor rules are having a lot of pretty bizarre effects. Aimed at Uber and Lyft but even has meant Vox severing ties with freelance writers in the state because California AB5 limits the number of articles they can write before having to be considered employees.

  • Uber needs to make its drivers independent contractors, and one of the changes they’re making is giving drivers destination information up front. This way they aren’t telling drivers where to go – the independent contractors choose for themselves.

Some drivers have the feature where they can see destinations before accepting a trip today. The rest will be getting it in the coming days, before AB5 goes into effect January 1.

Drivers aren’t supposed to discriminate on the basis of destination, but they won’t be penalized for not accepting rides either – and there’s no way for an individual rider to know when they haven’t had a ride accepted because of where they’re going. I have a feeling there will be class action lawsuits over this, aimed at Uber, subpeonaing data on rides to redlined areas that aren’t accepted or that take longer than in the past.

The whole idea behind not making the destination visible was to prevent redlining destinations and to ensure equality in provision of rides. That was a huge way that Uber was better than taxis. California law, though, is requiring Uber to go back to how things used to be. The rideshare company for its part says they “”can’t speculate on marketplace impact.”

Before Uber and other food delivery services, restaurants doing their own deliveries used to draw their service areas to avoid driving in minority neighborhoods too.

Drivers love the California-only change, and some passengers will appreciate it there to – it should put an end to drivers calling asking your destination before picking you up, and cancelling if they don’t like it (something I’ve only experienced myself at Washington National airport). Nevertheless I don’t think it’s even close to a positive for society.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Comments

  1. Garry, Uber does not “need” to keep their drivers independent contractors. They choose to do so. By the way, Fedex went through this with Fedex Ground and lost to California on classifying them as independent contractors. They still don’t operate any trucks or drivers, but rather subcontract to companies which employ people. That is an option, Uber could go, but it would increase their costs so they are being cheap and anti-consumer in the process.

  2. As to the comment on redlining, the thing is Uber is not a transportation company, they are a technology company simply connecting riders with drivers. That is how they fought compliance with the ADA for so long (and still don’t have many contracted wheelchair accessible vehicles), so I suspect they will use the same line of argument, that they are not a transportation company to fight any redlining lawsuits.

  3. Forcing drivers to go places they don’t want, maybe convenient to riders, but not a long term solution for social inequality.

    Its not uber, lyft, or taxi driver’s job to fix the inequality.

  4. In SF, the pay rates for drivers are much lower in the East Bay and South Bay. Drivers aren’t scared of Oakland, they just want to make money to feed their families. If Uber made the pay rates the same in Oakland as in SF, there really wouldn’t be the need to discriminate.

    After January 1st pretty much no one will be able to get a ride across the Bay Bridge, and that’s because of pricing.

  5. Just think, if Uber was not so greedy, with cutting driver’s pay for rides, this would not have happened. Drivers in big cities used to be able to earn a decent living driving for Uber. The pay is half as much as used to be. I do not buy into the Uber losing $billions because other than the app, Uber has no overhead. The drivers received nothing other than the pay per ride. There were not any other benefits. The drivers assumed all the cost and risks! Kalanick in the last 2 years was the best example of a greedy corporate monster. Who had no clue in leading Uber, other than sucking money out of it!

    Uber got what it deserved!

  6. Uber needs to make its drivers independent contractors, and one of the changes they’re making is giving drivers destination information up front.

    This is false. Uber already treats its drivers as independent contractors, and already dubious decision under existing law. The new law makes it untenable for them to continue to do so and rather than treating them as employees (which is pretty clearly the intention of the law) they are making some changes that they will then use to argue that their drivers ought still to be treated as contractors.

    I find it telling that you did not include a link describing the actual law. Checking the Wikipedia page it seems pretty obvious (to my admittedly non-legal mind) that the workers will still fail the second and, in many cases, the third of the three independence tests in the new law. I seems unlikely Uber’s policy will survive a legal challenge.

    In any event, I don’t believe that the new law will eliminate Uber’s needs to meet non-discrimination requirements of public accommodations and if, as you suggest, they can’t do that with independent contractors at their current rate of pay they will need to either (1) increase the driver pay rate and cut their own margin or (2) operate sufficient capacity using employees who do have to take whatever job comes along.

  7. Just because Uber tried to get one by on existing worker protection laws, and a new law was made to try to close a loophole, doesn’t mean that them continuing to act like assholes justifies the old way. We haven’t yet seen the people who drove for 3 to 4 years, broke their car from driving it so much, and now have not only no job driving, but no way to get to and from school, etc… Uber and others are taking advantage of the fact people don’t generally think long term, and thus short term dollars from driving aren’t being saved for reinvestment into cars for replacement. This is part of what companies do, reinvest… And Uber has found a way to make others pay this cost for them. If you didn’t think it would come back to bite them, you had to be blind.

  8. Uber loses billions of dollars per year. Making it more expensive for the two o operate is just going to get us back to an Uber-less world faster.

    Drivers don’t have to drive for Uber, they choose to do so. There is no God-given right to work in your job of choice for your income of choice. Drivers can (and often do) go do something else; others weren’t trying to make a full time living anyway. My retired neighbor does it for spending money.

    California certainly has the right to make the laws their citizens desire, and those citizens have the right to move Or elect new officials if they don’t like them.

    Trying to maximize shareholder value doesn’t make Uber assholes; it makes them uphold their fiduciary responsibility. If their business plan causes unwarranted litigation that causes more losses or makes their service worse and causes user defections (like AA), then those Edens should get fired by their board/shareholders. Still doesn’t make them assholes.

  9. Do you work solely for UBER as a part of their despicable 90 million $$$ PR campaign to fight AB5, a schill are you?? UBER and Lyft VAST horrible subjugation of drivers like Medieval lords to peasants is inhumane and disgusting. Redlining had nothing to do with Uber’s algorithms. Only extreme greed and Tyranny did. Period. Your article is garbage.

  10. The games NYC taxis play is one of the reasons why I have zero sympathy for them when they cry about uber. It wouldn’t surprise me if this also resulted in uber drivers skipping fares that don’t travel far enough in their minds. I have had experiences in some cities where the distance was too far to walk but the taxis would not take me because the distance was too short and therefore they would rather wait around for a larger fare.

  11. Uber and likely Lyft will be withdrawing from PHX airport due to increased ride sharing surcharges. Certainly not a positive outcome. Uber needs to come up with a better plan in terms of treating employees and customers. Lately I’ve seen too many drivers accepting ride and then stalling or heading in the wrong direction. Customers need to be able to rate those drivers poorly.

  12. Uber loses billions of dollars per year. Making it more expensive for the two o operate is just going to get us back to an Uber-less world faster.

    No it won’t. Uber will become similar to taxi’s but with a app for dispatch and payment. It also means, a likely limit on the number of drivers in larger cities and more regulation of Uber.

    Trying to maximize shareholder value doesn’t make Uber assholes

    Wrong, it absolutely does. You take your logic and you get pharmo bro who probably killed many people by increasing the price of prescription drugs to beyond what may could afford. Humanity and ethics should always be part of business decision making.

  13. This is an easy fix. If drivers were paid by the hour, there would be no need to turn down fares for any reason. Problem is, everybody wants a cheap ride, nobody wants the drivers to make a living. Not Uber/Lyft, not cab companies, not passengers.

  14. Spot on David Gonzalez. Those illiterate in economics and blinded by pure leftist ideology like Arlington will never realize their hatred for corporations is really just based on jealousy and a desire to have unearned stuff handed to them. This law will not kill Uber in California, since there are few other options, but I am confident if 3 things:. 1. It will not result in higher pay for Uber drivers. 2. It will not result in lower fares, or more ride choices. 3. It will reduce opportunity for many who would otherwise freely choose to be independent contractors. In other words, this law is a massive wealth destroyer for almost all stakeholders.

  15. I think the change makes sense. Uber always claims to be a rideshare company, not a taxi company. By knowing the destination in advance, it allows the driver to decide whether the fare is in right direction. If someone lives in NJ, but is in NYC, they might not want to accept a fare to Queens toward the end of their day.
    Uber should have made this change on its own but it basically is what a rideshare app should be.

  16. @WR2 1) Like a said, an Uberless world. You may think taxis with an app is an Uber world, but let’s all admit it’s a taxi world. With an app.

    2) Ah. Equating an app with a drug wither makes you a lemming (you know you could, ummm, just call a taxi and out the ‘assholes out of business right?). But alas, $52 billion companies that are 10 years old aren’t run by some “pharma bro”. They’re big companies with tons of management and a board regulated by the SEC. Who, specifically, is the asshole? The director of revenue management? The Sr Manager of Ops Svcs for whatever-town-you-are-in? The recruiting manager hiring these guys? The CEO who just got there a couple of years ago? Travis Kalinik, who isn’t involved anymore? I’m confused. Anyone who doesn’t want to be involved with the company doesn’t have to be, whether customer, contractor or employee. No need to name call.

  17. These problems would be easily solved if drivers were paid an hourly wage. They are the only ones providing the service that people are paying for, and they are the ones most abused by the system. Uber, cab companies and customers don’t care if drivers can make a living, they are only interested in paying the lowest price possible.

  18. This law is a huge problem for small businesses and networks of independent contractors. The big companies like Uber will find loopholes and exceptions but the small guys are getting caught up as collateral. We are not interested in working for the man.

  19. This law is idiotic as many drivers are part time or want to set their own hours each day. This is true for most contractors. Forcing everyone into an 8 hour job payroll job only benefits the tax collector. Shocker

  20. The comment about drivers not having a choice isn’t true. A Lyft driver told me very recently that they get to define a direction they want to go twice a day, so if they do get taken far away and need to get back, then they simply exercise those options (and there’s no penalties to the drivers for doing so)

  21. Wow – I have to wonder if any of the vitriolic comments about corporations are from people who have any understanding of how markets work.

    I live in Illinois but work a lot in California and have been thrilled that Lyft and Uber exist. I have asked dozens of drivers in several parts of the state their thoughts on the law. Almost universally, they oppose it.

    If you don’t like the services, don’t use them. If you want to pay more to drivers who make more money, use more expensive car services or taxis. Social justice is awesome – but, I also know the history of discrimination that pre-existed Lyft and Uber in some areas (NY) or the lack of service in other areas (Southern California) and I have zero desire to return to those days.

    No one is forced to drive for Lyft or Uber. There ARE jobs available with equal or higher pay, but almost none of them offer drivers the flexibility that Lyft and Uber do, which is a big motivator for many of the 200+ drivers I’ve talked with in the last year.

  22. If drivers can’t make a living driving for uber, they should. Go. Do. Something. Else. There’s no inherent right to make a living driving for uber, and there’s nothing indenturing them to stay drivers. If they lose enough drivers, uber will have to
    Figure out how to raise rates or go away. That’s how it works.

  23. I have taken Uber rides in 3 countries and 5 states. I have never had a driver say anything negative about the company or the job.

    The sponsor of the California bill is a former union hack who hates part time workers.

  24. The California law does not affect uber or Lyft only. It applies across all industries including medical practices for example.

    I get it that only the travel aspect is being discussed here but the new law has broader implications.

    Uber/Lyft May or may not have been the impetus for this law but it applies to all independent contractors.

  25. “Uber needs to make its drivers independent contractors, and one of the changes they’re making is giving drivers destination information up front. ”

    A better way to write this (which wouldn’t change the thrust of the article at all) would be:

    “In order to keep classifying its drivers as drivers independent contractors, Uber is going to give them destination information up front.”

    You don’t need to be pro-Uber or anti-Uber to agree with the point Gary is making in this article. Laws frequently have perverse and unintended consequences. Why? Because the population subject to the laws is adaptive. They will not keep doing exactly what they were doing before the law, they will adapt their behavior in foreseeable or unforeseeable ways.

    Here, the combination of the law and the adaptation will wipe away an anti-discriminatory aspect of the way Uber ran its business. That’s just an observation and not an argument, but its an observation to keep in mind when advocating for new laws.

  26. @Arlington Traveller: “That is an option, Uber could go, but it would increase their costs so they are being cheap and anti-consumer in the process.”

    Pro-consumer. They are keeping prices down. California politicians are the anti-consumer group. They are in the pockets of the unions.

  27. @JohnB: “The drivers received nothing other than the pay per ride. There were not any other benefits. The drivers assumed all the cost and risks!” That is what all independent companies and contractors get. When you you offer your body on the Bay Bridge, you get paid for the service, no pension.

  28. @Susan: “Problem is, everybody wants a cheap ride, nobody wants the drivers to make a living. Not Uber/Lyft, not cab companies, not passengers.” The drivers will go and work somewhere else if the rate is too low. It doesn’t matter how much you hate Uber drivers and want a cheap ride.

  29. Some legal history: in the late 19th and early 20th centuries, the courts (led by the Supreme Court in a decision called Lochner v. New York) viewed freedom of contract as the supreme principle of law, and in Lochner and other cases struck down labor regulations as unconstitutional violations of the freedom of contract. This inured to the benefit of corporations and capital, as there are always workers willing to work for less or under worse conditions.

    The Court in the 1930s reversed course, and upheld the Fair Labor Standards Act, which set minimum wage and overtime laws, against challenges that it violated the freedom of contract for workers who would be willing to work for less than the minimum wage, or for straight time vs time and a half overtime.

    Much like the Devil in The Usual Suspects, whose greatest trick was convincing people he didn’t exist, Uber and Lyft and Doordash have convinced their drivers and most of the commenters on this page once again that freedom of contract trumps, or ought to trump, all other considerations.

    “Sharing economy” drivers are employees under the FLSA, full stop. If you are arguing otherwise, you are arguing what you think should be, not what the law is.

  30. Fortunately, this nonsense will end when we have routine access to taxis without human drivers – so much safer and more reliable and likely cheaper, too. Despite existing autonomous vehicle taxi trials and many long-distance truck companies already testing and using these vehicles, routine widespread adoption may be a decade away. After that, though, no more exploited human drivers! They will all be free to go become something bigger and better for a living.

    Unfortunately, the fallout from California’s poorly conceived legislation will be in other freelance fields requiring actual skills beyond a drivers license , such as journalism and medical specialists that only work infrequently for any one business. Most are/will be eliminated from those positions due to the ongoing employment hassle being too great for the limited benefit to the primary business. It’s a shame California continues to be plagued by the unintended consequences of poor legislation.

  31. @one lawyer That’s a pretty simplistic view. Your viewpoint would make virtually everyone an employee and eliminate contractors and independent agents across the board. That would eliminate (ironically) many attorneys, doctors, real estate agents…you know, all the people with lobbying power to get themselves exempted from the CA legislation just past. The fact that these groups lobbied to get exempted would seem to be in opposition to your, again, simplified argument.

    There’s contractors and independent everywhere, and the NLRB nor the courts have taken us there.

    All that said, we’re headed for another court battle to find out where the judicial branch is on the definition of an employee. I tend to believe that, if Drivers can’t be contractors, doctors and attorneys are in for a new world too.

  32. Why would you intentionally place an employee, agent or contractor in harm’s way? After the recent assault, robbery and critical injury of a pizza deliveryman in an “undesirable” area of Dallas, this so-called “redlining” should be encouraged. Furthermore, redlining should be implemented as a corporate policy to provide a safer work environment for everyone.

  33. Mr. Gonzales,

    Short of writing a long treatise on wage and hour litigation, I’m not sure I can convince you, but I will try with a short treatise: under the multi-factor “economic reality” FLSA test for employee status used by the federal courts of appeals, in cases such as Bonnette and Torres-Lopez in the Ninth Circuit but common to all of the circuits, because Uber does not have a business without its drivers _and_ exercises essentially unilateral control over the terms and conditions of the drivers’ work, aside from whether the driver chooses to work or not work, the drivers are employees when they are driving and waiting in between rides. Doctors and lawyers are classic examples of high-wage professionals who work for themselves and have a wide range of individual clients. While Uber has spent a lot of time and effort convincing people that drivers, who like the strawberry pickers at issue in Bonnette earn little, ought to be treated like high wage, highly educated professionals as a matter of “economic reality,” that is just papering over the FLSA misclassification at the core of their business model.

  34. Hi Gary,

    Right NOW, before AB5 takes effect, I can tell you that you have some things wrong. For both Lyft and Uber, I can cancel on whoever I want, and for any reason (except certain handicapped persons). If you are not going the way I want to go, I can tell you so, and ask you to exit my vehicle. If I start the ride on the app, but don’t move the car, I can still cancel. There is no penalty for canceling or a low acceptance rate, those were removed after we (drivers) prevailed in several lawsuits. They can’t make us take someone we don’t want to, nor can they make us drive to any particular area. The latest contract confirms this.

    You have things BACKWARDS. When we become employees, we can very well LOSE the right to cancel or choose the rides we want. As an employee, we have to follow the will of the employer. As an independent contractor, they cannot make such demands.

    Personally, I think AB5 is a good thing, and it will be better for drivers and passengers alike (though I’d expect fares to increase, as they have to since Uber and Lyft are giving rides away below cost as it is.) That is… if we actually do become employees.

    Right now, Uber/Lyft are trying to set the systems so that we are really very independent in a last ditch effort to avoid fair pay and treatment… I doubt it will work — I expect CA to come down on them for the attempt. And to be fair, Uber is a crap company that treats drivers like toilet paper. The whole reason they want independent contractors is that this way they can have drivers make less than minimum wage, and pay no employer burden, shoving that extra tax onto the driver.

    I for one am ready to testify against them, as many drivers are.

Leave a Reply

Your email address will not be published. Required fields are marked *