This is not good for shareholders, but the company claims it has no choice, since running the business with all drivers as full-time employees would lead to an impossible hike in fees, likely rending the business uncompetitive and unprofitable. California is the largest state in the country as well as Uber's home state, and San Francisco and LA are two of Uber's biggest markets worldwide.
As we reported yesterday, Uber warned that it may need to hike prices by as much as 111% after a San Francisco judge ruled on Monday that the ride-sharing company, as well as its competitor Lyft, must classify its drivers as employees, a move which will disproportionately impact drivers from low-income backgrounds who don't see driving as a full-time job, but rather a flexible way to earn some money on their own terms.
The ruling was the confluence of months of developments in California leading to what would become one of the most restrictive, anti-business labor laws regarding ride-share drivers in the country. The precedent, which is effectively an interpretation of a new law signed by Gov Newsom in September, a law that imposes new restrictions on classifying employees as "independent contractors," could create problems throughout the "sharing economy" - and the tech industry more broadly - and not just in California.