Uber, DoorDash Hike Prices In California To Cover Prop 22 Benefits

Proposition 22 goes into effect this week in California. To cover the worker benefits under the state law, ride-hailing and delivery aggregators like Uber Technologies Inc (NYSE: UBER) and DoorDash Inc (NYSE: DASH) are hiking prices or introducing fees in California, Business Insider reports.

What Happened: Uber is introducing a flat fee per purchase in California that will vary between $0.30 to $1.50 for rides and $0.99 to $2 for Uber Eats deliveries depending on the customer's location, effective Monday.

DoorDash is hiking its service fee on deliveries and adjust promotion plans like DashPass starting Wednesday.

Why It Matters: Prop 22 was a ballot campaign by Uber, DoorDash, Lyft Inc (NASDAQ: LYFT), Instacart, GrubHub Inc (NYSE: GRUB), and Postmates that enables aggregator companies to not classify independent contractors as workers, exempting them from the California Assembly Bill 5 (AB5).

Prop 22 became law in November after California voted in favor of the ballot.

The surcharge will help cover the costs of minimum earnings, per-mile expenses, healthcare stipends, accident insurance, and other benefits that the companies hiring gig workers have guaranteed to pay under Prop 22, as per Business Insider.

The partial benefits under Prop 22 are much lesser than the guaranteed wages under AB5. Still, they are new costs to aggregator companies that weren't included in the company's pricing. 

As per Business Insider, both Uber and DoorDash are struggling to maintain a profit and a part of the new costs is being passed to customers.

Price Action: On Monday, Uber shares closed 2.22% lower at $51.46, and DoorDash shares fell 8.34% to $160.

See Also: Uber, Lyft, DoorDash Can Pay Gig Workers Up To 15% Compensation In Stock Under New SEC Proposal