Uber rides and food deliveries will cost more in California to cover new driver protections

Uber said Monday that customers in California will see prices increase this week for rides and food deliveries to help cover the costs of new benefits for its workers.

The new flat fees, which range from $0.30 to $2 depending on the service and location, will take effect Monday. The price hike comes as a controversial new gig economy law, which Uber and its peers spent millions pushing to pass, is set to take effect this week.

Californians voted in November to pass Proposition 22, or Prop 22, which exempts companies like Uber from having to classify their gig workers in the state as employees entitled to basic rights and protections such as workers’ compensation, unemployment insurance, family leave, or sick leave.

Under the new law, Uber’s drivers and delivery workers are independent contractors with some benefit concessions, including a minimum earnings guarantee based on “engaged time,” when a driver is fulfilling a ride or delivery request, but not the time they spend waiting for a gig. In a blog post and an email to drivers about the changes, the company said, “If you earn less than the guaranteed minimum over 2 weeks, we’ll pay you the difference automatically.”

Drivers will receive $0.30 reimbursement per engaged mile, lower than the IRS’ estimated $0.58 per mile cost of owning and operating a vehicle. Its workers will also be enrolled in an injury protection plan beginning this week. And starting next year, those with 15 on-trip hours per week will get a stipend for healthcare.

To fund these benefits, consumers will pay a “California Driver Benefits Fee” that varies by city, and by service, the company said. Rides will cost an extra $0.30 to $1.50. For food deliveries through Uber Eats, fees range from $0.99 per order in Los Angeles to $2 per order in San Francisco.

Uber had previously teased a number of drastic changes it may have had to make to remain in business in the state if the Prop 22 ballot measure had failed and the company was forced to classify its drivers as employees. The company said it might have had to downsize its fleet of drivers, shut down ridesharing in much of the state and tack on fees for riders to cover the more extensive benefits employees would receive in places it continued to operate.

Uber, along with Lyft, DoorDash, Instacart and Uber-owned Postmates, spent more than $200 million pushing the ballot measure.

On an earnings call two days after its political win in California, Uber CEO Dara Khosrowshahi said that execution of Prop 22 “may have some implication as it relates to rates,” but that the company believes “any effect that it has on rates will not have a significant effect on trip volumes one way or the other based on the kinds of sensitivities that we’ve seen in the past.”

Companies like DoorDash and Lyft have similarly said they expect to tack on some additional costs for customers associated with the changes for workers.

DoorDash spokesperson Taylor Bennett told CNN Business that rather than add a new fee, the company is exploring slight increases to existing service fees on California orders beginning Wednesday in response to new benefits associated with Prop 22.

Lyft notified drivers in an email last Friday that the minimum earnings and compensation for vehicle expenses associated with Prop 22 would go into effect on Wednesday. A spokesperson for Lyft said the company did not have anything to share regarding changes for riders.

Uber and Lyft have a long history of steep losses, and have said that they will achieve profitability on an adjusted basis next year. DoorDash, which went public last week, turned a rare quarterly profit during the pandemic before returning to a loss in the most recent quarter.