Without scheduled shifts, drivers will purposefully all sign up for the same shift to induce supply overflow.
In this situation, drivers can game the flexibility of the system to collect a paycheck while sitting in their cars doing nothing.
Even if drivers don't game the system, there will always be natural imbalance between supply and demand. Surge bonuses can mitigate this imbalance, but scheduling shifts is the more economically efficient way to solve the imbalance problem (hence why they say schedule flexibility will no longer be a feature in a driver employment model).
Option 1: Deny any attempts to "clock in" whenever the number of drivers waiting in a region exceeds a certain density.
Option 2: Your shift starts when you pick up a passenger, and ends when you drop them off. (I have no idea whether this actually meets the state's requirements. I do suspect that there exists an equally clever solution that will work.)
Uber and friends built their entire businesses in working around existing laws. I'm sure they can figure out how to navigate the new laws.
Then put some kind of system in place to have on-call duty, where you get a small share of the normal payment for being available and then getting the normal rate while you are driving to the customer and driving them to their destination.
All of this is already practiced in some place in the world. Sure, it's not as easy as creating an account on the app and off you go, but the driver flexibility of choosing when to drive doesn't seem to be so hard to me.
Drivers will still take advantage of such a system. Whenever a market is over-supplied, drivers will sign in to collect their free "on-call duty" checks for doing nothing.
That's what contracts are for. Let's say that you can only pass on some small amount of rides or your on-call duty is terminated. Or go further and state in your contract that you have to take rides if you're on on-call duty. If you have too many drivers, don't 'hire' more. If you have too few riders on the important times, increase the bonus.
There are all kinds of adjustments you can make.
Another thing: you don't get paid for "doing nothing", you are getting paid for dropping everything when needed. On these conditions you're limited in all kinds of ways, e.g.
Taking care of a small kid alone? - not possible.
Going shopping? - not really possible.
Ultimately, scheduling shifts is going to be both easier to manage and more cost efficient than what you're suggesting. Uber has a good idea of how many drivers they need at any given time. This ideal distribution of supply will never align perfectly with the supply pool's natural scheduling preferences. You can try to use economic incentives to force these two distributions to overlap, or you can just exert control (that you rightfully have over employees) and force your employees to work when you need them.
Yeah, I was a bit optimistic or even idealistic in thinking that Uber&Lyft are then treating their employees like independent contractors simply because they did before. I just want to stress that no one is really preventing them from doing so. It's "just" expensive and would need them to trust their employees to an extent.
Even if drivers don't game the system, there will always be natural imbalance between supply and demand. Surge bonuses can mitigate this imbalance, but scheduling shifts is the more economically efficient way to solve the imbalance problem (hence why they say schedule flexibility will no longer be a feature in a driver employment model).