Uber is Making Big Changes in California for Drivers

Posted by: Sergio Avedian Jan 10, 2020
Updated Jan 16, 2020


I have been an Uber and Lyft driver for about four years, I have seen the Good, the Bad and the Ugly during that time period. After years of abusing its drivers by massive fare cuts, Penny Surge replacing the multiplier, disappearing quests, boost zones and CRBs (Consecutive Ride Bonus), Uber finally looked like it was relenting to a California law called AB5 with some major positive changes for its California drivers! I have written extensively in the past about AB5 which would have converted every Uber driver from IC (Independent Contractor) to an employee as of January 1, 2020 since it failed to pass the required ABC test.

Last month, Uber and Postmates filed a lawsuit in federal court in California, seeking an injunction that would have blocked AB5 from going into effect against them, calling it unconstitutional. Uber, along with Lyft and DoorDash, has already said it will collectively spend $90 million on a ballot initiative for the 2020 elections to create a new category of work for drivers. AB5 is poses an existential threat to all gig companies but specifically to Uber and Lyft. Uber is definitely taking action (hedging their bet) in case they fail to overturn the law in the upcoming elections but Lyft has chosen to completely ignore what is going on and conducting business as usual. Lyft has decided to roll the dice and not even acknowledge the fact that AB5 applies to them, they have totally diverged from Uber in every shape or form. 

Recently, I wrote about Uber’s driver app changes for Rideguru. They included divulging the destination of the trip to the driver on the ping screen before accepting the request as well as trip length, trip duration and estimated earnings. This is what drivers always wanted but wait, there's more good news as of today for California drivers.

On Wednesday morning, Uber emailed 200,000 California drivers and millions of California passengers to alert them to the additional changes. Uber is giving drivers more control over their rides and making fares more transparent, the changes seek to establish that drivers are running independent businesses because AB5 offers some exemptions for business-to-business relationships between its drivers and its passengers.

Uber explained the changes as “due to new state laws,” in a letter to riders that included a warning that those laws could hurt them. “These changes may take some getting used to, but our goal is to keep Uber available to as many qualified drivers as possible, without restricting the number of drivers who can work at a given time,” the company wrote. “We want your Uber experience to be excellent, and fewer drivers on the road would mean a more expensive and less reliable service for you.” Uber, which loses money at a rapid clip, is intent on keeping drivers from becoming employees, which could add some $500 million a year to its labor costs and it says that drivers being employees would destroy the flexibility that both its business model and its drivers rely on.

Christmas for Drivers in CA had come early, is this the icing on the cake?

Passengers in California will now no longer see upfront pricing for all trips other than Uber Pool; instead, they’ll get a range of prices. The final price will be calculated at the end of the trip based on the actual time and distance traveled. Previously, if the fare estimate was too low or too high, Uber either ate the difference or pocketed it. That resulted in situations where a passenger might pay $20 for a trip, for instance, but a driver received only $10, angering drivers who shared such examples on social media. Last month, in response to a new law in California, Uber announced changes to protect and enhance the driver’s ability to work flexibly and on their own terms. As a first step, all California drivers now see estimated earnings and trip destination up front before accepting a trip.

As a next step, Uber is simplifying its fare structure to further clarify the relationship between the driver and their riders, and Uber’s role as a technology platform. Do you notice the specific language? Uber is just a technology platform and passengers now are the driver’s customers and we as drivers are Uber’s patrons. If this is not to skirt the new California law, I don't know what is. While time and distance rates have not changed, some of the changes, especially those Uber has made to promotions (quests and consecutive streaks), may take some time to get used to. 

What is Changing?

Uber’s Service Fee on Uber X trips in California won’t be more than 25% of the trip fare and will be shown in advance on your offer card as seen in the screenshot above. The final trip fare will be calculated at the end of the trip, and it will be based on the actual time and distance of the trip. 

Let me break this down drivers! The split now will be as it was years ago with 75% of the trip fare going to the driver and 25% going to Uber. No more 50-50 split due to upfront pricing shenanigans. No more upfront pricing PERIOD! Now the driver will get 75% of what the passenger paid.

Note: A 28% Uber Service Fee will apply to all UberXL, Comfort, SUV and Lux trips.

No more Penny Surge (Flat Rate Surge), the old multiplier is back so is the chance for unicorns again! During busy times and in places where a lot of riders are requesting trips, your map will now show Surge multiples instead of fixed dollar amounts starting immediately! For trips beginning in these zones, you’ll earn a multiple of the trip fare, which will be included in the estimated earnings range on your offer card. Your trip earnings will be based on the same Surge multiple that the rider pays.

On Pool trips, you’ll see the exact amount you’ll earn for every completed pickup, before you start the trip. Unlike the estimated range you’ll see on UberX trips, your offer card will show the exact amount you’ll earn for every Pool pickup. Every time a new rider is added to your Pool trip, you’ll also see the additional amount you’ll earn, as well as each rider’s destination. The Service Fee on UberPool trips is based on factors such as whether you match with additional passengers and how much time on route is shared between passengers.

Previously, if you drove in a city where Quest promotions were available, you were offered a payout when you completed a certain number of trips in a given period. Starting next week, if you complete a certain number of Quest trips, you’ll pay Uber a lower Service Fee for the remaining trips you take in that period which means that you can take home more of your earnings. For example, if you choose a 50-trip Quest and complete 75 trips, you’ll get a lower Service Fee for the last 25 trips. 

Uber is also replacing the Consecutive Trips promotion with a new promotion called Boost. With Boost, you’ll have the chance to lower Uber’s Service Fee by completing trips in certain locations during busy times of day. Unlike Consecutive Trips, Boost won’t have a minimum trip requirement (like 3). Any Service Fee reductions you receive through Boost will always be in addition to those you get with Quest, but the Service Fee will never be less than 1% of the trip fare.

My Take:

These are all positive changes for all CA drivers, I am cautiously optimistic. It is pretty much everything drivers wanted for the longest time. Will the next step be for drivers to name their price for rides? I am not sure if the technology is there to facilitate that but never forget, the Uber algorithms are still in charge, they may put you in quiet time outs or throttle drivers who are earning above a certain amount per hour.

We all know that Uber never gives up anything for free! Is this a temporary phenomenon or is it here to stay? Is Uber doing this until they defeat AB5 through the court system or via the election ballot in 2020? What will happen if AB5 falls, will Uber punish drivers more than before? Time will tell but for now enjoy the ride!

FAQ on the new changes

What is changing about Uber’s Service Fee?

Uber is simplifying the fare structure to further clarify the relationship between the driver and the passengers, and Uber’s role as a technology platform. Starting this week, Uber will take a fixed percentage Service Fee on the fare that a rider pays the driver on every trip (UberPool excluded). On UberX trips, this fee will be 25%. On other trip types, such as UberXL, Comfort, SUV, and Lux, this fixed service fee will be 28%. 

What is the Service Fee, and why does Uber charge the Driver?

The rider pays the driver a fare for every trip. Uber then charges the driver a fixed-percentage Service Fee on that fare for your use of the Uber app in connecting you with your passenger. The Service Fee goes toward funding Uber’s platform operations, and supports innovation that allows Uber to connect more riders and drivers.

How will this fare structure change my earnings?

For non-Pool trips, you will continue to earn based on the actual time and distance of the trip. Time and distance rates haven’t changed and you will continue to earn as normal. Uber’s Service Fee will not exceed 25% for UberX trips, and it will not exceed 28% for UberXL, Comfort, SUV, and Lux trips. 

What is changing with Surge Pricing?

The amount you earn for Surge will now match the amount a rider pays in Surge on every trip, less Uber’s fixed Service Fee. This means that drivers will now earn multiples of the fare (base, time and distance) when it’s busy and riders pay more for a trip. You will be able to see the Surge multiples (e.g. 1.8x) highlighted in orange on your map. The fare estimate you see on the offer card will include any Surge multiples that are being applied. You’ll also see the Surge icon next to the fare range to indicate that Surge is being factored into the estimate.

What is changing on UberPool?

For Pool trips, you will now see an exact fare, rather than an estimated fare range, on every trip offer card. This exact fare is based on our best estimate of the time, distance, and likelihood of finding additional passengers to join your Pool trip. On subsequent pickup opportunities within each Pool trip, you’ll see another offer card that will include additional fares for completing each leg of the trip. Previously, you earned a small fixed amount for every additional passenger you pickup on your Pool trip. Starting this week, you will earn for each additional passenger’s fare that you pick up, less Uber’s Service Fee. You’ll be able to see the exact amount you can earn for each Pool leg, as well as their pickup and dropoff locations, on every Pool offer card. The Service Fee on UberPool trips will vary based on the efficiency of the match. This is based on factors like whether or not you match with additional passengers, how many passengers, and how much time on route is shared between passengers. The Service Fee will not exceed 45% on any individual Pool segment, and will be clearly displayed on your receipt.  

What happened to the Booking Fee and why isn’t it on my trip receipt?

Until January 2020 in California, the Booking Fee was a flat fee charged to the rider on your behalf that Uber collected from you. As of January 2020, Uber charges a separate fee (called the Marketplace Fee) to riders directly, to connect parties within the marketplace. This fee is separate from the trip fare or any other rider payment to the driver, and does not impact the amount you take home on each trip.

Why is the promotions structure changing?

Because drivers are Uber’s customers, Driver promotions will now come in the form of lower Service Fees rather than additional direct payments to you. Now you can earn reductions in your fixed Service Fee percentage, to as little as 1% of the trip fare. The new Quest promotion for drivers in California will allow you to earn a lower Service Fee after completing a predetermined number of trips. This will replace the old version, where you could earn a promo payment for completing a certain number of trips. You’ll still be able to choose a Quest that’s best for you during every selection window, and the promotion periods are not changing. If you do not choose a Quest offer before the selection window closes, you will not be eligible for the lower Service Fee promotion for that period. The new Boost promotion will allow you to earn a lower Service Fee on trips in busy times and places. The promotion times, locations, and Service Fee reductions will be outlined in a weekly email, and will also appear on your map and offer card when active. This will replace the Consecutive Trips promotion, in which the terms required you to complete three trips in a row during specified times and places in order to earn a promo payment. Unlike the new Quest promotion, you won’t need to take any other action to activate your Boost promotion. 

Why is Uber making these changes? Will they be available nationwide?

These features are in response to feedback from drivers and the passing of new laws in the state of California. These features are available to California drivers only. As with all feature launches, Uber mentions that they will monitor the effects of the change to ensure the experience is working properly and doesn’t create any unintended issues for drivers or riders. 

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