By Tina Bellon
(Reuters) - Uber Technologies (NYSE:UBER) Inc on Wednesday informed its California customers that it would switch to providing estimates as opposed to fixed prices for its rides in response to a new law that makes it harder to qualify its drivers as contractors.
In an email sent out to riders and seen by Reuters the company said the final price would now be calculated at the end of a trip, "based on the actual time and distance traveled."
"Due to a new state law, we are making some changes to help ensure that Uber remains a dependable source of flexible work for California drivers," the company said in the email.
The change applies to all private rides, while upfront prices will continue to be provided for shared, or pooled rides.
The email included a picture displaying an example of a ride request on the Uber app. It showed a $27 to $36 range for an UberX ride, the company's most popular private ride option.
Uber in a blog post on Wednesday said the step was the result of changes to its fare structure, with drivers still getting paid per mile and minute, but the company now taking a fixed 25% cut from drivers. That service fee previously fluctuated.
Uber on Wednesday also told customers it discontinued some of its reward benefits for frequent riders.
The company hopes the changes will bolster its argument that Uber is merely a technology platform connecting riders with drivers, not a transportation company.
The California law strikes at the heart of the "gig economy" business model by making it harder for companies to qualify their workers as contractors rather than employees. The measure went into effect on Jan 1.
By classifying contractors as employees, technology companies like Uber, Lyft Inc (NASDAQ:LYFT), DoorDash and Postmates Inc would be subject to labor laws that require higher pay and other benefits, such as medical insurance.
Uber and Postmates, a courier services provider, in a lawsuit in late December asked a U.S. court to block the law.
Uber has repeatedly said that its drivers are properly classified as contractors.
Nevertheless, the company has made changes to its driver app in recent weeks, with California drivers now being able to see more information ahead of accepting a trip, including the ride's likely fare, length and destination.