Tag Archives: Lyft

California Judge Rules Against Uber, Lyft on Gig Worker Law

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A California judge set aside a statewide proposition exempting drivers working for companies such as Uber, Lyft and DoorDash from the state’s “gig workers” law, which requires employers to provide all employees with benefits, including health care and vacations. 

Lyft driver masked
A California judge ruled against the new Prop 22 law approved by voters last fall.

The ruling, in a case filed earlier this year by the Service Employees International Union, is a setback for Uber and Lyft, which have built their business model around part-time drivers and spent millions on the campaign that led to the passage of Proposition 22 in last November’s election. 

Uber said it plans to appeal the judge’s decision and is confident it will ultimately prevail. However, judges in California have succeeded in killing off other proposals approved by voters in the past. For example, a judge overturned a ban on gay marriage approved the California voters. 

Ruling hurts bid in other states 

Dara Khosrowshahi at Elevate event

Uber’s chief, Dara Khosrowshahi, and other execs said the company’s would go bankrupt if they had to make drivers company employees.

The ruling also could slow Uber and Lyft’s efforts to have similar laws, allowing them freedom in determining how to compensate drivers, in other states. A law similar to California’s is now pending in Massachusetts.  

“A prohibition on legislation authorizing collective bargaining by app-based drivers does not promote the right to work as an independent contractor, nor does it protect work flexibility, nor does it provide minimum workplace safety and pay standards for those workers,” Alameda Superior Court Judge Frank Roesch wrote in his ruling. 

“It appears only to protect the economic interest of the network companies in having a divided, ununionized workforce, which is not a stated goal of the legislation.” 

The coalition representing Uber and other companies using gig labor said in a statement Friday that it planned to appeal. 

Lyft driver

Lyft teamed up with Uber, DoorDash another to fight for Proposition 22 in California.

“We will file an immediate appeal and are confident the Appellate Court will uphold Prop 22,” said Geoff Vetter, spokesperson for the Protect App-Based Drivers & Services Coalition, in a statement. “Importantly, this Superior Court ruling is not binding and will be immediately stayed upon our appeal. All of the provisions of Prop 22 will remain in effect until the appeal process is complete.” 

Unions hail ruling 

From the other side of the fight, Bob Schoonover, president of SEIU California State Council, said in a statement, “Today’s ruling by Judge Roesch striking down Proposition 22 couldn’t be clearer: The gig industry-funded ballot initiative was unconstitutional and is therefore unenforceable. Companies like Uber and Lyft spent $225 million in an effort to take away rights from workers in a way that violates California’s Constitution. 

“They tried to boost their profits by undermining democracy and the state constitution. For two years, drivers have been saying that democracy cannot be bought. And today’s decision shows they were right,” he added.

California’s courts have sided with the drivers in the rulings leading up to the passage of Prop 22 last fall by the state’s voters. The parties on both sides have been at odds since California passed a law known as Assembly Bill 5 in September 2019. In fact, the companies wanting to keep workers as contractors, thus ineligible for benefits, lost a court case less than two weeks before the current law was passed by voters.

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Lyft Sells Self-Driving Business Unit to Toyota for $500 Million

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Lyft has been using the autonomous prototypes in the Las Vegas market.

Lyft Inc. sold its autonomous vehicle technology unit, Level 5, to Toyota Motor Co. for $550 million, following the lead of its rival, Uber Inc.

The company launched Level 5 in 2017 to build a self-driving system for its network of vehicles. The goal, ultimately, was to eliminate the need for drivers. The company grew to nearly 400 employees, but as Lyft continues to lose money overall, it needed to find ways to end its string of quarterly losses.

Not only will it get $550 million from Toyota, it will also stop funneling multiple millions of dollars into a development project with no finish line in sight for a payoff. Lyft gets $200 million immediately and the remaining $350 million will be paid in installments during the next five years.

Uber finalized a similar deal last fall, selling its autonomous vehicle unit called Advanced Technology Group to Aurora led by former Waymo chief Chris Urmson for $400 million.

Immediate financial relief

Lyft has provided 100,000 self-driving rides as part of its autonomous technology development.

The ride-hailing company said selling its Level 5 subsidiary puts it back on the path to profitability. First and foremost, it cuts $100 million of annualized non-GAAP operating expenses on a net basis, Co-founder and President John Zimmer noted in the announcement.

“Assuming the transaction closes within the expected timeframe and the COVID recovery continues, we are confident that we can achieve Adjusted EBITDA profitability in the third quarter of this year,” Zimmer said in a statement.

The company isn’t getting out of the robotaxi business. It’s already partnered with Motional and Waymo to develop self-driving tech and now it will just rely on that partnership to move toward autonomous vehicles. Working with the pair, Lyft’s already provided more than 100,000 self-driving rides in its vehicles in the last three years.

However, Lyft can now focus on what it can do best with autonomous vehicles by offering services such as routing, consumer interface and managing, and maintaining and cleaning partners’ autonomous vehicle fleets, which could mean added revenue, it said.

Uber made a similar choice

Lyft’s deal is similar to Uber’s move last December to sell its Advanced Technology Group, or ATG, to Aurora, the autonomous vehicle technology company founded by Google and Waymo veteran Chris Urmson. The deal came in at $400 million.

Uber CEO Dara Khosrowshahi noted after the sale of its ATG unit the company’s path to profitability had been shortened.

AVs were a critical component of the path to profitability by Uber, which now relies on part-time drivers or gig workers to ferry passengers, using its celebrated phone app. Uber invested huge sums in its internal AV project; however, was crippled in 2018 when one of its test vehicles struck and killed a pedestrian in Tempe, Arizona. It never really recovered.

Uber also ended up with a 26% ownership interest in Aurora on a fully diluted basis, the company said in a filing.

Aurora and Uber agreed to collaborate to launch self-driving vehicles on its ride-hailing and food delivery network. Uber is also working on building out its freight logistics platform but is not operating its own trucks at present.

The completion of the deal caused Uber’s CEO Dara Khosrowshahi to utter a familiar refrain to Reuters: “This essentially advances our path to profitability.” He said the deal should put the company on track for profitability by the end of this year, largely due to the fact Uber would no longer be investing vast sums of cash into ATG.


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