OAKLAND, Calif. — Uber and Lyft, which are facing mounting pressure to classify their freelance drivers as employees in California, are looking for another way.
One option that both companies are seriously discussing is licensing their brands to operators of vehicle fleets in California, according to three people with knowledge of the plans. The change would resemble an independently operated franchise, allowing Uber and Lyft to keep an arms-length association with drivers so that the companies would not need to employ them and pay their benefits.
The idea would effectively be a return to the days of how groups of black cars were run. Lyft has presented the plan to its board of directors, one person said. Uber, which already works with fleet operators in Germany and Spain, is also familiar with the business model.
The companies have not committed to the franchise-like plans, said the people with knowledge of the discussions, who asked to remain anonymous because the details are confidential. Uber and Lyft are waiting to see how California’s legal situation around drivers, who have been treated as independent contractors, plays out first, they said.
Matt Kallman, an Uber spokesman, said the work on establishing fleets was “exploratory” and that the company was “not sure whether a fleet model would ultimately be viable in California.”
A Lyft spokeswoman, Julie Wood, said the company had looked at alternative models but favored an approach where drivers “remain independent and can work whenever they want while also receiving additional health care benefits and an earnings guarantee.”
The ride-hailing giants are considering how to retool their businesses as they grapple with a new California law, Assembly Bill 5, which could upend their services. The law, which was designed to grant employment benefits to gig workers, could force Uber and Lyft to categorize drivers as employees if it was shown that the drivers’ jobs were part of the companies’ core business, among other criteria.
Although the law went into effect in January, Uber and Lyft have not complied with it, arguing that they are simply tech platforms and are not transportation businesses. In May, California sued Uber and Lyft to enforce the new law.