Uber, Lyft Competitors Rev Their Engines In California

On the eve of a court order to reclassify freelance drivers as employees in California, competitors of Uber Technologies Inc. and Lyft Inc. are ready to pick up their customers if the ride hailing giants suspend service, CNBC reports.

A California judge has ruled Uber must end its practice of categorizing its workforce as gig workers in favor of classifying them as employees by Thursday (Aug. 20). The change would provide drivers with benefits such as sick and vacation pay, unemployment insurance, workers’ compensation insurance and healthcare.

The judgement came after California Attorney General Xavier Becerra sued Uber and Lyft for violating the state’s new Assembly Bill 5 (AB5) labor law.

Last week, Uber and Lyft said if forced to comply, they would likely curb service at least temporarily as the companies consider an appeal or a stay of the ruling. They have warned California customers of the potentially imminent shutdown, the network reported.

In November, voters will be asked to approve a ballot initiative that would exempt ride-hailing businesses from the law.

Two startups told CNBC they are accelerating plans to enter the California market amid the potential gap in service.

Alto, a Texas rideshare service, had planned to expand to California by next year. But CEO Will Coleman said his company will be on the streets no later than early November.

“The reality is that having W-2 workers is actually significantly more innovative than [having] contractors in the transportation space,” Coleman told the network.

He said while the sheer number of Uber and Lyft drivers lowers prices for customers, it also drives down driver’s pay.

Another startup, Arcade City, has experience competing against the ride-hailing leaders when Uber and Lyft briefly left the Austin, Texas market as strict background checks of drivers were required.

On Tuesday, Uber told Bloomberg that the company is considering a franchise model. He said it would look similar to its operations when it launched in 2011, when users were only allowed to hail a black luxury car. The price was 1.5 times that of a taxi.

Also this week, Uber said it will continue operating its food delivery business, Uber Eats, in California even if its main ridesharing business is forced to shut down.