Uber let drivers set their own fares — pricing power as proof they're contractors

In January 2020, Uber was testing a feature at California airports in Sacramento, Palm Springs and Santa Barbara that let drivers set their own rates: they could increase fares in 10% increments, up to five times the base rate, and riders were matched with the lowest fare. Days later Uber planned to also let drivers price below base and opt out of surge pricing. The company framed it as giving drivers more control — and, pointedly, as bolstering the argument that drivers are independent contractors rather than employees.

The trigger was AB5, California's new law requiring more companies to convert contract workers to employees, with benefits and added protections. Uber, Lyft and Postmates argued that would upend their business model and destroy gig-economy flexibility, and were refusing to comply while negotiating with state officials. Uber's own executives admitted the experiment had costs: Daniel Danker, head of driver product, said it could create volatility for riders who expect consistent prices and added 'meaningful complexity' for drivers.

The early results were mixed, which was itself revealing. Driver Adnan Badaoui said even a small increase adds up for drivers. Kim Beaver set her fare 50% above base when the feature launched and waited an hour with no activity, predicting 'chaos.' A traveler at Sacramento airport complained he had no way to know what the normal rate was. McGeorge School of Law professor Francis J. Mootz III said the effort was probably too late to sway lawmakers: had the companies truly restructured for worker independence years earlier, it might have been different.

AB5 threatened to convert contractors into employees, so Uber redesigned the job to look like what the law protects: independent businesses whose owners set prices.

Fare-setting power is one of the strongest legal markers of contractor status — an employee does not decide what to charge.

The feature was confined to three airports, making it a controlled legal experiment rather than a full product rollout.

It doubled as a genuine control giveaway, which Uber could cite to lawmakers as evidence of entrepreneurial flexibility.

When classification rules threaten your model, giving up control can be the defense: the more the workers run their own businesses, the harder they are to call employees.

Gig companies kept negotiating with California officials for relief from AB5 while the experiment ran. Drivers reported split experiences — some gained, one sat idle for an hour at a raised fare — and riders worried about price confusion. Professor Mootz doubted pricing power alone would convince lawmakers that drivers were truly independent.