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Franchising Industry Updates

Uber, Lyft Consider Franchise Model in California

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A California judge ruled freelance drivers need to be reclassified as full-time employees. To keep drivers at arms-length, Uber and Lyft are reportedly discussing licensing their brands to operators of vehicle fleets. (iStock/Andrei Stanescu)

Earlier this month, a California judge ruled that Uber and Lyft had to reclassify their drivers as employees within 10 days. Two days later, Uber CEO Dara Khosrowshahi responded by saying that, “If Uber had to abide by California labor law, it would require a business model change so extreme the entire company would have to pull out of the state until November,” according to NBC News.

Uber and Lyft drivers are classified as gig workers or independent contractors. This means drivers have few of the protections of an employee: no minimum wage, no benefits and few ways to challenge their employer if they feel wrongfully terminated or mistreated.

In a race against time to classify their freelance drivers as full-time employees in California, Uber and Lyft are reportedly discussing licensing their brands to operators of vehicle fleets, according to The New York Times. The change would resemble an independently operated franchise, so Uber and Lyft would not need to employ drivers and pay benefits.

“The companies have not committed to the franchise-like plans, said the people with knowledge of the discussions, who asked to remain anonymous because the details are confidential,” according to The New York Times. “Uber and Lyft are waiting to see how California’s legal situation around drivers, who have been treated as independent contractors, plays out first, they said.”

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