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Uber and Lyft Consider Franchising Model for California

Published on Aug 18, 2020 at 7:17 am in News.

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As Uber and Lyft continue to fight against classifying their rideshare drivers as employees, the companies are considering a new business model—specifically for the state of California. According to the New York Times, both companies are discussing the possibility of licensing their brands to operators of vehicle fleets.

Both Uber and Lyft, who are based on San Francisco, consider their drivers to be contractors. This means that drivers are responsible for their own vehicle and maintenance costs. In addition to that, Neither Uber nor Lyft pays for overtime, unemployment insurance, or other expenses that would generally be managed if a worker was classified as an employee.

Licensing their brand would result in independently operated franchises. This would allow Uber and Lyft to continue to keep their drivers at a distance, so they wouldn’t need to employ them or pay for standard benefits.

Considerations for retooling the businesses come as the California law, Assembly Bill 5, requires companies to grant gig economy workers with employment benefits. While the law went into effect in January, neither company has complied with it. Both argue that they are tech platforms and are not transportation businesses.

If Uber and Lyft were to go through with franchising, the companies would operate similarly to how black car groups were run. As of the publication of this blog, neither company has committed to the franchise-like plans. According to an anonymous source who spoke with the New York Times, both companies are waiting to see how California’s legal situation regarding gig economy workers plays out.

Both companies, however, did respond to the New York Times when asked for comments regarding the potential franchising model. Matt Kallman, an Uber spokesperson, said the work on establishing fleets was “exploratory” and that Uber is “not sure whether a fleet model would ultimately be viable in California.” Julie Wood, a Lyft spokesperson, acknowledged the company has looked at alternative models but continues to favor an approach where drivers “remain independent and can work whenever they want while also receiving additional health care benefits and an earnings guarantee.”

For more information on the latest rideshare industry news, click here to visit our blog. In the event you or someone you know has a legal question pertaining to an Uber, Lyft, or e-scooter incident, schedule a case evaluation with the Rideshare Law Group today. We’ll review your situation and help you determine how best to proceed to secure your financial future.