In Response to California’s AB-5, Uber Ends Upfront Ride Pricing Among Other Changes

On January 8, Uber announced to California customers that it would begin showing price estimates instead of fixed prices in response to California’s AB-5 law, which makes it difficult to classify drivers as independent contractors, instead of employees. The gig economy law went into effect on January 1. The law has notably impacted companies like Uber, Lyft, DoorDash, and Postmates, who can no longer classify workers as contractors and instead must classify them as employees, thus requiring higher pay and benefits. Uber and Postmates previously sued against AB-5 claiming it was unconstitutional.

“Due to a new state law, we are making some changes to help ensure that Uber remains a dependable source of flexible work for California drivers,” Uber stated in an email.

Uber sent an email out to California riders, stating the final price would be calculated at the end of the trip “based on the actual time and distance traveled.” This change only applies to private rides; upfront pricing would still be provided for Uber pool users. Uber stated changes were made to its fare structuring. It will continue to pay drivers per minute and mile; however, Uber would now take a fixed 25 percent cut; instead of its previously varying cuts. Surge pricing would be a multiple of the price instead of a fixed amount. Uber is now providing California drivers with more information about a trip before accepting it, including the estimated cost, length and distance and can reject the ride request without penalty. Some changes would also apply to Uber Eats.

Other changes will allow users “to schedule rides with [their] ‘favorite drivers’ after giving them a 5-star rating; [t]hose drivers can accept or refuse the rides.” Uber also announced that it was stopping some of its reward perks for frequent users. Other changes are still in progress.

Uber is hoping that these changes will solidify that Uber is a technology company, not a transportation company.