With ride-sharing services coming more and more common, it's no surprise that companies will new features. Uber Technologies, Inc. (NYSE: UBER) is testing out a new feature that enables some drivers in the state of California to pick how much they will charge customers for a ride.
The reason why this feature is being tested is in response to a new California law known as Assembly Bill 5 (AB5). This latest law makes it more difficult for employers in the state to classify workers as independent contractors. California Assembly Bill 5 took effect on January 1 of this year. The bill requires a business like Uber and Lyft Inc. (NASDAQ: LYFT) to prove its contract workers are free from company control. The feature is being tested at three California airports: Santa Barbara, Sacramento and Palm Springs. This new aspect allows the Uber drivers to increase fares to up to five times more than Uber's original price.
According to the Wall Street Journal, the new changes let drivers increase the price in 10% increments from the original base price. This new concept created something to the effect of a bidding system. According to Uber, customers will be paired with the driver offering the lowest rate. Drivers who set higher prices would have to wait longer for trips if they want to earn more money. However, as the demand increases, drivers who had higher fares will be matched with riders, too. Uber describes the new feature as to offer drivers a way to be more flexible with their work.
In September 2019, reports stated that Uber was taking steps to fight the California legislation that was passed around that time. Believing that the legislation violates the U.S. and California constitutions, Uber and Postmates decided to sue the state of California. Reports claim that Uber's goal is to make appropriate changes that will drivers to still be considered independent contractors. If Uber were to classify their drivers as employees, it would cost the company millions of dollars by forcing the company to provide benefits like minimum wage guarantees, overtime, unemployment insurance, and workers' compensation. As a result, the company claimed that they plan to make more new changes to improve drivers' control over their own pay.