Facing pressure in California to classify their freelance drivers as employees, Uber Technologies (UBER) - Get Report and Lyft (LYFT) - Get Report, are pondering a detour in their usual ride sharing approach - licensing their brands to vehicle fleet operators as a workaround to a new law that grants gig workers employment benefits.
Citing people with the plans, the New York Times reported Wednesday that both ride-hailing companies are exploring the option as a way to keep an arms-length association with drivers so that they would not need to employ them and pay benefits.
The discussions come on the heels of a new California law, Assembly Bill 5, which grants gig workers employment benefits. While the law went into effect in January, Uber and Lyft have not complied, arguing they are tech platforms and are not transportation businesses.
In May, California sued Uber and Lyft to enforce the new law. Earlier this month, a San Francisco Superior Court judge ordered the companies to employ their drivers by Thursday. Executives at Uber and Lyft have both appealed that decision, arguing they cannot meet that deadline and will be forced to turn off their services as early as Friday.
Both companies have threatened to leave the state until November, when California voters will decide on Prop 22 -- backed by a number of gig platforms including Uber, Lyft and DoorDash -- that would overturn key provisions of AB5.