California's Gig Economy Payback: Uber, Lyft, DoorDash to Reimburse Unpaid Vehicle Expenses

Uber Technologies, Inc UBER, Lyft, Inc LYFT, DoorDash, Inc DASH, and other app-based ride-hail and delivery companies will have to reimburse California gig workers potentially millions of dollars for unpaid vehicle expenses between 2022 - 2023.

The arrears reflect a provision in Proposition 22 that classifies gig workers as independent contractors rather than employees and promises them halfhearted protections and benefits.

Starting in 2021, when Prop 22 hit California, drivers began receiving $0.30 per mile driven while “actively engaged.” The rate needs a rise to keep up with the pace of inflation. 

So, 2022’s 6.8% inflation raise should have bumped those payments to $0.32 per mile; in 2023, it should have gone up another $0.02 to $0.34 per mile, TechCrunch reports.

With close to 1.3 million gig drivers in California clocking thousands of miles yearly, it can add up to an enormous sum.

Also, in line with the lackluster benefits afforded to gig workers under Prop 22, their vehicle mileage deduction rate is half the standard rate for business owners and employees, which in 2023 is $0.655 per mile.

Uber and DoorDash immediately started sending backpay to drivers.

DoorDash, in an emailed statement to Benzinga said, “Prop 22 provided historic new benefits and protections for Dashers, including a minimum earnings guarantee. The California State Treasurer's Office is responsible for calculating and publishing annual mileage rates to use for minimum guaranteed earnings calculation. Despite DoorDash’s requests for updated mileage rates from the Treasurer’s Office, dating back to January 2022, the updated rates for 2022 and 2023 were only recently published by the Office on May 10, 2023. We have since updated the 2023 mileage rate in our system and are working diligently to ensure California Dashers’ earnings in 2022 and 2023 meet or exceed the guarantee under the newly published rate, and are in the process of issuing pay adjustments where needed."

Lyft said it has now begun issuing back pay. Grubhub said it would start retroactively paying drivers.

Many ride-hail drivers exceed the minimum rate, making them ineligible for vehicle reimbursement fees. 

However, those who mainly drive for Uber Eats, DoorDash, and other food delivery platforms tend to rely more on tips for income and should begin seeing payments in their accounts.

Uber is the only company to stipulate that the payment results from California Prop 22 benefits. 

Price Actions: UBER shares are up by 2.83% at $39.57 on the last check Friday. LYFT shares traded higher by 0.96% at $9.45, and DASH shares traded higher by 1.54% at $68.61.

Photo by thought-catalog via Unsplash
Editor's Note: The story has bene updated with comments from DoorDash and their stance on the issue