Defeat for Uber and Lyft: California court declares drivers to be employees

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Protest: Union driver against Uber and Lyft-operated Proposition 22 on August 6 in Los Angeles

Vehicle service providers Uber and Lyft have suffered a setback in years of dispute over the status of drivers on their platforms. A judge in California issued a restraining order that a 2019 law in the US state requires drivers to be considered employees rather than independent contractors.

However, it should only be an interim result in the conflict. The judge suspended the order for ten days to allow Uber and Lyft to appeal. The companies are hoping that California citizens will take their side in a vote that will coincide with the US presidential election in early November. "Proposition 22" would expressly exempt them from the legal obligation to employ their employees.

The judge tried Uber and Lyft, they were playing for time. The companies counter that, according to surveys, most drivers do not want to be employees themselves in order to have more flexibility. However, there are also protests by organized drivers who advertise "Proposition 22". In addition, the corporations argue that the new status would lead to a significant price increase due to higher costs, for example through social security contributions.

Uber boss calls current system "outdated and unfair"

Uber boss Dara Khosrowshahi (51) suggested that platforms for people who are considered independent contractors set up funds for health insurance or paid vacations, for example. The current employment system, in which people either have to work as employees with extensive social benefits or as independent contractors without protection, is "outdated and unfair", argued Khosrowshahi in the "New York Times". There must be a third way, but new laws are necessary for this.

Khosrowshahi admitted that Uber's dealings with the drivers were problematic and that the company's history - under its aggressive predecessor Travis Kalanick (44) - was causing suspicion. However, the simple solution of simply hiring the drivers officially is out of the question. "Uber could only offer full-time jobs to a fraction of today's drivers and would only be able to operate in far fewer cities than it does today."

At the turn of the year, Uber had almost 27,000 employees, but a good five million officially self-employed drivers worldwide. Lyft had two million, so both companies would easily be among the biggest employers. Even under the guise of pseudo self-employment disguised as a sharing economy, the business model does not seem sustainable. So far, both companies have only been profitable in a few quarters of their existence.

The collapse in demand during the Corona crisis further worsened the business figures. In the first half of 2020, Uber posted a loss of $ 4.7 billion. The shares of Uber and Lyft are trading well below the high valuations the companies were listed at in 2019.

ak / dpa