Uber Takes Another Lick’n, Will They Keep on Tick’n?

As if the driver shortage isn’t bad enough for surface transportation businesses, Uber and Lyft stocks tumbled yesterday on the heels of a statement from Biden’s Labor Secretary Marty Walsh. Now spread over all the front news pages, Walsh told Reutter’s that Gig Workers should be classified as employees.

This labor classification fight has been long and contentious but it’s been held to the state levels until now. If the pro labor Biden Administration decides that the balance of wealth is unfair – and it won’t take much to figure that out given the extraordinary salaries at the top of Uber and Lyft as compared to the meager sums dolled out to the drivers, a federal reclassification could be eminent.

For the first time in their 12-year lifespan, Uber and Lyft’s business models are being scrutinized by the Federal Government and if it’s determined that their driver base must be classified as employees, Uber stands to incur about $500 million (Lyft $200 million) or an extra 30 percent more in overhead per year.

Welcome to our world. While the Taxi industry has a longstanding exemption carve out, we in the luxury segment do not. Uber and Lyft entered the transportation market in 2010 and by 2013 had taken away more than 50 percent of our business travel market share all because of three things. Better technology and deliverability, for sure, but those were problems we could catch up on and solve. No, the biggie was price. They not only undersold our services they trained the business traveler to distrust us because they undercut us by so much. That had a profound impact on our client relationships and was the beginning of the erosion of our bread and butter – airport runs.

We may be seeing a change in the wind. In California, Uber and Lyft spent $200 million on ads to convince the public that voting YES on Prop 22 was a good thing when it wasn’t. Their testimonial ads focused on the driver pool that is indeed part time, such as students, making it seem that all the drivers were FOR the independent contractor model. The truth is the career drivers (those that are full time) are the ones that want the stability of being employees. Because of Prop 22 which collided with the Pandemic shut down, this demographic of driver is abandoning the transportation industry which has totally destabilized Uber and Lyft. The driver shortage is very serious problem. However, it affords us a good lesson - Take care of your people or someone else will.

Now that the Federal Government is getting involve with this labor issue, this is no longer just a state issue but a national hot button topic. It’s going to get very interesting to be sure and perhaps give the GCLA a new argument for the state of California.