Uber expands driver-led pricing to all of California amid fears new policy could lead to ‘race to the bottom’

The name-your-price feature will now let drivers choose their own fares through the fare multiplier

Prior to the new policy, drivers had no control over the rates that were set by the company (Getty)

Uber has expanded a policy that allows drivers greater control over their rates they charge to all of California, increasing fears of a "race to the bottom" between employees.

Prior to the new policy, drivers had no control over the rates that were set by the company.

The name-your-price feature will now let Uber drivers choose their own fares through the fare multiplier. They can either set their fares as little as half of Uber's price or five times the standard pricing.

Riders would be notified by the app if their driver set their rates higher than the company's initial estimate, similar to how Uber notifies users about surge pricing during popular times.

The move is part of a new effort by the company to prove that its drivers are independent contractors and should not be classified as employees under California's Assembly Bill 5 (AB5) law, which went into effect at the beginning of this year.

The law requires companies to identify independent contract workers as employees under certain requirements, which would then mean they're entitled to benefits like overtime pay, unemployment, and union rights.

Uber, and other companies with independent contract workers, save millions each year by not providing these benefits to employees.

California Attorney General Xavier Becerra filed a lawsuit in May against Uber and its competitor Lyft for "misclassifying" drivers as independent contractors instead of employees to avoid AB5.

Mr Becerra has previously criticised the company for not protecting its workers with benefit packages.

"Californians who drive for Uber and Lyft lack basic worker protections – from paid sick leave to the right to overtime pay. Uber and Lyft claim their drivers aren't engaged in the companies' core mission and cannot qualify for benefits," he said.

"Uber and Lyft drivers who contract the coronavirus or lose their job quickly realise what they're missing. But it's not just these workers who lose. American taxpayers end up having to help carry the load that Uber and Lyft don't want to accept. These companies will take the workers' labour, but they won't accept the worker protections."

The new "flexibility pricing" in the state has popped up in what appears to be in response to AB5, but Uber also claimed it was because of what drivers wanted from the company.

"The reality is the overwhelming majority of drivers have said in survey after survey – including one conducted last month – that they prefer working independently," an Uber spokesperson told NBC News.

Altering pricing for drivers was an unlikely solution, though, to sway to courts away from implementing AB5 with the ride-share company.

Another concern about the new feature is that it would not be beneficial for the drivers to have an option to alter pricing. Instead, the new function could cause a "race to the bottom", with drivers who are charging more ultimately having to push prices low due to a lack of interest from riders.

Uber initially pushed out the new option to Sacramento, Santa Barbara, and Palm Springs in January. It has since expanded throughout the state.