A decade after companies like Uber rocketed to popularity by offering low-cost, on-demand services, governments are pushing back
The California bill passed this week that threatens to make drivers for ride-hailing companies into employees rather than independent contractors is the latest move by regulators and courts around the globe that could curtail companies like Uber Technologies Inc. UBER 0.21% and Lyft Inc. LYFT 0.99% and food-delivery businesses like DoorDash Inc.
When Uber and other gig-based companies like TaskRabbit started, consumers were initially delighted by the convenience and novelty. Their employment model—independent contractors aren’t necessarily paid by the hour and don’t have benefits like health insurance or unemployment insurance—helped the companies stay nimble and undercut incumbents like taxis that can be burdened by city pay regulations. Workers could drop in and out as they liked, including squeezing in work between other jobs.
“You see the same identical recurring issues around the world—they’re around congestion, driver pay, environmental impact,” she added. “In New York, a lot of this happened quicker.” More on the Gig Economy The moves threaten to add significant costs for the gig economy, which extends beyond Uber and Lyft to a host of delivery companies like DoorDash and Instacart, whose delivery bikes and cars now dot urban streets around the globe. Almost none of these companies is profitable, and Uber and Lyft in particular haven't identified clear paths to profitability.
Still, both companies say they will continue to work with governments in the future. A Lyft spokesman said the company has long “worked with regulators to find solutions that benefit drivers and riders and support innovation.” “People who work in these fields need to be protected,” said Anthony Rendon, the Democratic speaker of the state assembly. “If it impacts their business model it’s probably because they need to be paying their employees more.”
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