California Governor Gavin Newsom signed into law Wednesday a controversial bill that could upend the business models of ride-hailing apps like Lyft (LYFT) and Uber (UBER) by relcassifying some independent contractors as employees.
In a statement on Wednesday, Lyft suggested it’s willing to push for a voter referendum to undo Assembly Bill 5 if the ride-hailing company is not successful in working with Newsom to create carvouts to ease the law’s potential impact.
“We are confident that with his leadership we can reach a historic agreement, but if necessary we are prepared to take this issue to the voters to preserve the freedom and access drivers and passengers want,” Adrian Durbin, Lyft’s senior director of communications, said in a statement to Yahoo Finance.
A coalition of companies that oppose the law, set to become effective January 1, including Lyft, Uber, DoorDash, and Postmates, has been working with elected officials and labor leaders to find an alternative to the law’s full application.
Lyft, along with Uber and DoorDash, have each committed $30 million to a would-be $90 million fund to launch a ballot initiative, should an agreement fail to be reached before January 1.
Flexible hours ‘extremely important’
In negotiations, Lyft says it offered drivers alternatives to AB5. Under its proposed terms, California drivers would be the first to receive a net earnings guarantee of at least 32% above local minimum wage, as well as expense reimbursement, ensuring at least $21 per booked hour.
In addition, Lyft offered to establish legislation permitting workers to form a labor union, plus establish a benefits fund, which could include protection for injured workers. The company says it also offered paid sick leave and paid family leave for drivers who spend in excess of 20 hours per week in booked rides, though it did not specify what additional requirements would apply to drivers who elect to have injured worker and paid leave benefits.
Lyft stresses that it would have as many as 300,000 fewer drivers in California if it were required to classify drivers as employees because employee-drivers would be slated to work in scheduled shifts. According to the company, 77% of drivers identify flexible hours as “extremely important.”
For Uber’s part, the company has said, despite the law, it plans to continue treating drivers as independent contractors, and may have success challenging it.
Yahoo Finance contacted Uber for a response to Newsom’s signature on the bill, and did not receive an immediate response.
Shares of Uber at market close Wednesday were mostly flat. Lyft shares ended the day down 3%.
Alexis Keenan is a reporter for Yahoo Finance and former litigation attorney. Follow Alexis on Twitter @alexiskweed.
Read more:
Uber and Lyft face 2 big threats to their business model after California law
Lawsuit against Lyft sheds light on number of women claiming sexual assault by drivers
Read the latest financial and business news from Yahoo Finance
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.
