Emerging from the pandemic, Uber, Lyft may face global challenges to their gig work model

Key Points
  • For rideshare companies like Lyft and Uber, the slow emergence from the pandemic brings hope that their services will hum back to life as customers resume travel.
  • But there are still challenges ahead for gig-economy companies operating in the rideshare and food delivery spaces.
  • One was signaled by Uber’s recent decision in the U.K. to reclassify its drivers as employees after the supreme court there handed down an unfavorable ruling.
Uber CEO Dara Khosrowshahi speaks at a product launch event in San Francisco, California on September 26, 2019.
Philip Pacheco | AFP via Getty Images

Things seem to be looking up for rideshare companies Lyft and Uber as people prepare to resume travel, but new worries may be around the corner.

That's because while these companies may enjoy pent-up demand for travel and a political win in California that reaffirmed their gig work model, firms that rely on a fleet of independent contractors face global challenges to the way they operate.

For starters, there's Uber's recent decision in the U.K. to reclassify its drivers as entitled to some benefits, though not full employee status, after the supreme court there handed down an unfavorable ruling.

As workers in Britain, these drivers are entitled to minimum wages, holiday pay and retirement benefits.

"I think everyone was watching the U.K.," said Wedbush analyst Dan Ives. "There's a lot of fear that now this is going to spread to France, to Germany, to Scandinavia. And ultimately that can really crimp a lot of that gig economy if other countries follow it."

Generally, by classifying workers as independent contractors, the firms avoid the expense of maintaining employees.

This year, Uber has 5 million drivers around the world, according to the ridesharing giant. Meanwhile, Lyft said in 2019 that it had 2 million drivers on its platform. While fighting to maintain the independent contractor model in California, both firms said they would have to retreat or scale back jobs if they were forced to claim drivers as employees.

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