Uber and Lyft are reportedly planning to give some of its drivers cash bonuses with the intent that those drivers would then be able to use the cash to purchase stock in the two companies’ respective impending IPOs, according to a new report from The Wall Street Journal.
It’s a complicated workaround to a unique problem facing the ride-sharing companies, who can’t grant stock to their drivers due to Securities and Exchange Commission rules that prevent giving private company stock shares to contractors, who technically aren’t considered full-time employees under the law. And while the SEC has requested comments from companies as to whether or not it should change that rule, it’s unlikely that even with the support of Uber, Lyft, and Airbnb that those changes would arrive in time.
The cash bonuses would give drivers a chance to invest without being directly granted stock
By granting the drivers cash bonuses with the option to put it towards shares — drivers can also choose to simply keep the money — Uber and Lyft are giving drivers the chance to invest in (and reap some of the profits, should there be any) the company at IPO prices, without directly granting them stock.
The two programs are said to differ from company to company. Lyft (which is planning to IPO in March) has the simpler plan of the two. Drivers who have completed 10,000 rides will get $1,000, either in cash or put towards IPO-priced shares, while drivers with over 20,000 rides will get $10,000. Given that neither company has formally announced the bonus programs yet, though, it’s entirely possible for plans to change.
Uber (whose IPO is expected shortly after Lyft’s) will reportedly be putting hundreds of millions of dollars toward the program that would give “a significant portion” of drivers either a straight cash bonus or the chance to put that awards towards buying shares at the IPO price. The bonuses will apparently be tiered based on how long a driver have been working with Uber and the number of trips they’ve made, although there’s no word yet as to how much money individual drivers can expect to receive.
The fact that ride-share drivers aren’t considered full-time employees has been a contentious debate over the past few years, with stock options just one of the issues at stake. Several lawsuits have tried to classify drivers as full employees, although courts have largely ruled in favor of Uber and Lyft in keeping drivers as independent contractors for now. There have been other positive effects, though — Uber, for example, has started rolling out a program offering rewards to drivers, including free college tuition and increased earnings.
Lyft declined to comment when asked about the new program; Uber had yet to respond to a request for comments at time of publish.