Uber is making serious changes to its app in California in an effort to comply with the state’s groundbreaking new gig work law that makes it harder for the company to classify drivers as independent contractors.
On Wednesday, Uber emailed over 150,000 drivers and millions of passengers to alert them to the changes. The app will now display prices differently, allow users to select preferred drivers, and discontinue some benefits associated with its Uber Rewards program.
The company is betting that by giving drivers more control over their rides and making fares more transparent, they can avoid some of the repercussions of the law, which enshrines the so-called “ABC test” for determining whether someone is a contractor or employee. But it could also result in more rejected trips for passengers. Uber, which has hemorrhaged money since its disastrous IPO last year, is dead set against classifying drivers as employees.
In its email to riders, Uber warned that “new state laws” could end up hurting passengers. “These changes may take some getting used to, but our goal is to keep Uber available to as many qualified drivers as possible, without restricting the number of drivers who can work at a given time,” the company wrote. “We want your Uber experience to be excellent, and fewer drivers on the road would mean a more expensive and less reliable service for you.”
Passengers in California will now no longer see upfront pricing for all trips other than Uber Pool; instead, they’ll get a range of prices. The final price will be calculated at the end of the trip based on the actual time and distance traveled.
Previously, if the fare estimate was too low or too high, Uber either ate the difference or pocketed it. That resulted in situations where a passenger might pay $20 for a trip, for instance, but a driver received only $10, angering drivers who shared such examples on social media.
Passengers can also add drivers to a list of “favorites,” giving them priority to accept future ride reservations. Drivers who are given a one-star rating won’t be matched on future rides. The company is also discontinuing some Uber Rewards benefits, like price protection on a route and flexible cancellations.
There are big changes for drivers, too. Drivers will now be able to see more trip information, like a trip’s time, distance, destination, and estimated fare ahead of time, before accepting a ride request. They can also reject a request without penalty. This could lead to more frequent rejection of shorter trips that drivers determine aren’t worth their time. Drivers could also refuse to accept rides to certain neighborhoods, which could lead to discrimination against lower-income areas. (A spokesperson for Uber said the company is monitoring the situation and hasn’t seen any discrimination yet.)
Surge pricing, which occurs during periods of peak demands, will be included in fare estimates for both passengers and drivers. Drivers will also see an icon next to the fare range to indicate that surge is being factored into the estimate.
In a statement, a spokesperson for Uber said that “AB5 threatens to restrict or eliminate opportunities for independent workers across a wide spectrum of industries, including trucking, freelance journalism and ridesharing.”
Last month, Uber and Postmates filed a lawsuit in federal court in California, seeking an injunction that would have blocked AB5 from going into effect against them. And the company, along with Lyft and DoorDash, has already said it will collectively spend $90 million on a ballot initiative to create a new category of work for drivers.
The gig work companies view it as a necessary price to preserve their business model and spare themselves even higher costs down the road. Experts estimate that a workforce of employees costs companies 20 to 30 percent more than a workforce of contractors — which translates to hundreds of millions of dollars per year to Uber and Lyft.