Uber Weighs Backup Plan If Controversial California Labor Law Stands

Uber is weighing contingency plans that could dramatically shrink its California operations should a ballot campaign aimed at revoking a controversial state labor law fall short on Election Day.

Speaking at The Wall Street Journal’s annual Tech Live confab, Uber Chief Executive Dara Khosrowshahi dropped some ominous hints that a major overhaul – and downsizing – of its business in California may be in the cards should the company and its allies fail in their drive to repeal Assembly Bill 5, or AB 5, which was passed by state lawmakers last year.

Under AB 5, Uber and Lyft would be forced to reclassify their drivers – who are now independent contractors – as employees entitled to minimum wage and full benefits.

Uber and Lyft face nearly $400 million in increased labor costs should the law go into effect as planned on Jan. 1, Reuters has estimated.

The two ridesharing services – as well as other gig companies like DoorDash – have raised more than $200 million to promote Proposition 22, a ballot measure that would repeal the hotly contested law, the Journal reports.

“We are looking at all our options,” Uber Chief Executive Dara Khosrowshahi said during the WSJ Tech Live conference, which was held remotely on Tuesday (Oct. 20). “We will do our best to operate in California … Where in California we will operate is a question mark, and the size and scale of business will be a big question mark.”

Still, exactly what Uber has in mind for a Plan B is not clear, though Khosrowshahi is offering a few hints.

If AB 5 goes into effect, Uber will only be able to hire a small number of the more than 200,000 drivers it now relies on across the state, according to the WSJ. Khosrowshahi is also warning that consumers could see sticker shock as well, as Uber will likely have to hike prices by anywhere from 25 percent to 100 percent, the paper reports.

Drivers, meanwhile, may have to work fixed shifts, taking away the flexibility that has drawn some to gig work, the Uber chief contends.