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Lyft co-founder: Drivers have made it clear they don't want to be employees

·Anchor, Editor-at-Large
·3 min read
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Lyft's co-founder and President John Zimmer told Yahoo Finance he wasn't surprised by Labor Secretary Marty Walsh's comments last week that gig economy workers should be classified as employees. 

"They [the comments] were not super surprising," Zimmer said. "I would say, we don't think the government's comments signal any major change. The drivers have made it clear they don't want to be employees."

Zimmer is referring to Prop 22 passing in California in November 2020. In a major win for gig economy workers, Lyft and Uber were exempt from classifying their drivers as employees.

The passing of Prop 22 didn't stop Walsh from stirring the pot a week ago. 

“We are looking at it but in a lot of cases gig workers should be classified as employees ... in some cases they are treated respectfully and in some cases they are not and I think it has to be consistent across the board,” Walsh said in an interview with Reuters.

While Zimmer wasn't surprised, investors were caught off guard.

Shares of Lyft and Uber fell 10% and 6%, respectively, by the close of last Thursday's session.

Adds Zimmer, "I think you'll see various solutions, similar to Prop 22, with potential to bring labor leaders into the fold as well over the coming quarters. So I don't think it really changes much. So it's also a surprise that would be the market reaction [to Walsh's comments].

Earnings signal recovery

The market in typical fashion has a short memory, and has pivoted quickly to refocusing on the recovery in Lyft's business from the depths of the pandemic. Lyft's better than expected results Tuesday evening signaled the rebound is gaining steam, sending shares higher by 3% in pre-market trading on Wednesday.

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"The recovery is clear, it's happening," Zimmer said, pointing to 7% growth in revenue in the first quarter versus the fourth quarter. The number of active riders using the platform increased by about 1 million sequentially.

Zimmer declined to divulge second quarter to-date trends, simply saying demand is improving "rapidly."

"I think it's a matter of time before we get back to pre-pandemic levels, but will be emerging much stronger and actually more profitable per ride than we were going into the pandemic," Zimmer explained.

Zimmer reiterated Lyft's goal of being adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] profitable in the third quarter. The profitability goal was originally set to be hit in the fourth quarter of 2021, but was pulled forward following the recent sale of Lyft's autonomous-driving outfit to Toyota for $500 million. The sale will allow Lyft to reduce its expense base and focus on its core ride-hailing and scooter-rental platforms.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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