Lyft Says It Will Raise Prices If New California Labor Law Takes Effect

Lyft co-founder and president John Zimmer said the new law, called AB5, expected to go into effect next year will raise prices for its customers.

Lyft’s co-founders say they’ll raise prices for rides if a recently passed California law takes effect in January that makes some drivers employees.

The law may force Lyft to reclassify some drivers as employees rather than independent contractors, requiring the company to pay salaries, provide health benefits, and pay income tax and social security for the workers.

“Any costs that are created in a marketplace are typically passed to customers,” Lyft president John Zimmer Zimmer said at the Wall Street Journal’s Tech Live conference on Tuesday in Laguna, Calif. 

California Governor Newsom signed bill, called AB5, into law last month following a 29-11 vote by California’s senate. The law creates a higher standard for companies in certain industries to classify their employees as independent contractors. The goal for is to make it harder for on-demand companies to underpay or deny health benefits to workers.

The law followed protests and strikes nationwide by Uber and Lyft drivers, who complained that their pay was falling.

Since then, Lyft, rival Uber, and food delivery service DoorDash said they planned to work with California lawmakers and labor representatives to revise the upcoming law. But Zimmer, who appeared on stage with fellow co-founder Logan Green, suggested that the companies haven’t made much progress.

“We have not gotten a response from labor or from legislators that are being leaders here,” he said. “So we will run a ballot initiative to try and create” the future of work.

Lyft is not trying to carve itself out of the bill, Zimmer said. Rather, he said the company is trying to protect the flexibility drivers currently have in being classified as contractors like working when and how much they want. 

Zimmer said 90% of its drivers work less than 20 hours. Under the new law, all employees would be required to work specific hours, giving them less flexibility.