Uber Will 'Shut Down' in California If It Must Classify Drivers as Employees

[Theodarzna]

In a Wednesday morning interview with MSNBC's Stephanie Ruhle, Uber CEO Dara Khosrowshahi said Uber would likely shut down temporarily if it failed to appeal a recent ruling requiring immediate reclassification of its drivers as full-time employees. Currently, Uber’s business model relies on classifying drivers as “independent contractors” who do not enjoy the benefits or stability that come with employment.

"We think the ruling was unfortunate. We respect, obviously, the law and the court and the judge," Khosrowshahi said. "If the court doesn’t reconsider, then in California, it’s hard to believe we’ll be able to switch our model to full-time employment quickly, so I think Uber will shut down for a while."

In the interview, Khosrowshahi warned Uber may have to shut down until November, when voters will choose to accept or reject Proposition 22, a $110 million referendum led by Uber and backed by a coalition of gig economy companies to save their business model. Proposition 22 is meant to give drivers more protections while allowing Uber to still minimize labor costs, but researchers at the UC Berkeley Labor Center found that the measure would only guarantee $5.64 an hour, not the $15.60 an hour that Proposition 22 advocates promise.

The MSNBC interview is the latest in a round of public relations initiatives Uber has undertaken in order to beat back encroachments on its business model and propose alternatives to classifying drivers as employees. The company’s tooth-and-nail fight to convince lawmakers and the public hinges on the idea that Uber likely would not survive as a juggernaut if it had to treat drivers like other companies treat their employees. This argument is well-worn for Uber, as is the tactic of exiting uncooperative cities.

When pressed by Ruhle on what Uber would look like once it was AB5 compliant, Khosrowshahi replied: "You would get a much smaller service, much higher prices, and probably a service that's focused in the center of cities versus a bunch of the smaller cities or the suburbs that we operate in right now."

In a New York Times op-ed earlier this week, where Khosrowshahi proposed a new law that would force companies including Uber to pay into benefits funds for drivers, he made a similar argument. Khosrowshahi said that "drivers can continue to have the flexibility they have, but they can enjoy the protections—benefits fund, an earnings standard—so that they've got the protections many associate with full-time work." The op-ed also raised the specter of a very different Uber if it classified drivers as employees: expensive rides, fewer cities.

Indeed, Uber's value proposition to investors, according to its own IPO documents, would be "adversely affected if Drivers were classified as employees instead of independent contractors" because of the threat of unionization, minimum wages, benefits, and other unconscionable costs.

Currently, Uber is facing down a major tab in numerous jurisdictions arising from its mistreatment of drivers. Uber already owes New Jersey $650 million for unpaid unemployment insurance taxes from 2014 to 2018. Additionally, more than 5,000 Uber and Lyft drivers in California have collectively filed over $1.3 billion in wage claims (each company burns through hundreds of thousands of drivers each year). Uber and Lyft are also estimated to owe California $413 million in unpaid state unemployment insurance taxes from 2014 to 2019.

Research has shown that Uber drivers are neither flexible nor independent, but in fact tightly surveilled and controlled by a company that experts have said is likely violating antitrust law—all contrary to Khosrowshahi’s assertions. But there is likely truth to the idea that classifying drivers as employees rather than contractors would come at a major cost to the company.

It is not as though these conditions are propping up a money-maker. Despite Uber’s ubiquity, the company has never turned a profit and burns billions of dollars annually with spending on subsidies and promotions in order to extend its reach. In a 2019 SEC filing, Uber admitted that this strategy of gaining market share even at a steep financial cost “may adversely affect [Uber’s] financial performance.”

Uber has engaged in years of heavy-handed tactics to avoid any changes to its business model, including the threat of stopping or suspending service and appealing to the public.

In 2018, Veena Dubal, Ruth Berins Collier, and Christopher Carter, co-wrote a paper detailing how Uber regularly flaunted the law by either mobilizing its apps' users to help the company bully politicians into abandoning talk of regulation, or by simply leaving. When Austin lawmakers tried to require ride-hail drivers to get background checks, for example, Uber and Lyft put forward Proposition 1 to kill the reform—the referendum failed on May 7, and by May 9, Uber and Lyft were gone. Similar finger-printing requirements emerged in Houston and San Antonio. In Houston, Uber accepted the regulation before threatening to leave—it stayed once lobbying successfully overturned the decision. In San Antonio, Uber outright left in protest of the fingerprinting requirement, but returned as the city made fingerprinting optional.

It’s worth noting that Uber has had years to plan for re-classifying its drivers. Drivers have technically been employees since 2018’s Dynamex decision, and AB5 merely codified that California Supreme Court ruling.

While the goal of Uber’s PR push is to demonstrate its value to the public and to push back against re-classifying its drivers, ultimately, it reminds us that merely existing hurts the company and following the law just might kill it.

When Motherboard reached out to Uber for comment about its plans to restructure if the appeal failed, a spokesperson directed us to a motion Uber filed asking for a stay on the injunction to allow Uber a few weeks to seek its appeal.

(Source)

First, how insanely badly-managed is Uber that is still fails to make any money despite having skirted all forms of normal regulations like minimum wage and health insurance laws and not having any capital expenses to speak of? I know I know, a lot is said about how Uber and Lyft and such are just trying to undercut cab companies to get to monopoly status and then they can ratchet up the rates and soak up all that cash but essentially have a much more slave like labor force (The dream of the Neo-Liberal). But as a business plan it doesn't really scan as possible or make any actual sense. A competitor could easily just do the same thing once they jack up the rates again.

Second, There can't really ever be a rideshare monopoly because its just some Silicon Valley software that can be built by anyone. Right now "Businesses" like Uber and Lyft subsist entirely on an unlimited supply of venture capital and seem to do only two things, burn investors money and destroy Taxi drivers and skirt labor laws. I know people praise them as some so-called market leader but being a market leader isn't hard when you basically have unlimited venture capital, no actual legal regulations ever put upon you, if only MoviePass could have gotten this quasi-religious level of hype.

California should tell these people to leave and just never come back.

[Drutt]

Just goes to prove that Uber's "brilliant" innovations are nothing more than skirting labour laws in a race to the bottom at the worker's expense.

[Shalcker]

(Source)

First, how insanely badly-managed is Uber that is still fails to make any money despite having skirted all forms of normal regulations like minimum wage and health insurance laws and not having any capital expenses to speak of? I know I know, a lot is said about how Uber and Lyft and such are just trying to undercut cab companies to get to monopoly status and then they can ratchet up the rates and soak up all that cash but essentially have a much more slave like labor force (The dream of the Neo-Liberal). But as a business plan it doesn't really scan as possible or make any actual sense. A competitor could easily just do the same thing once they jack up the rates again.

Second, There can't really ever be a rideshare monopoly because its just some Silicon Valley software that can be built by anyone. Right now "Businesses" like Uber and Lyft subsist entirely on an unlimited supply of venture capital and seem to do only two things, burn investors money and destroy Taxi drivers and skirt labor laws. I know people praise them as some so-called market leader but being a market leader isn't hard when you basically have unlimited venture capital, no actual legal regulations ever put upon you, if only MoviePass could have gotten this quasi-religious level of hype.

California should tell these people to leave and just never come back.

It's just one of SoftBank's ways of burning Saudi money.

That it brings misery to workers is a bonus.

[NoiseTank13]

Good, sorted, next.

[kail]

I believe it was originally intended to be a simple ride-sharing app that allowed P2P transactions while the platform takes a cut. Similar to eBay, the sellers are not exactly employees but just users of the platform just like the buyers. With labor being involved, I can see the reasoning behind giving drivers benefits as employees.

If they are classified as employees, they will have to meet quotas as employees instead of just driving for Uber/Lyft whenever you want.

[AeneasBK]

Fuck Uber.

[BlackDruid96]

(Source)

First, how insanely badly-managed is Uber that is still fails to make any money despite having skirted all forms of normal regulations like minimum wage and health insurance laws and not having any capital expenses to speak of? I know I know, a lot is said about how Uber and Lyft and such are just trying to undercut cab companies to get to monopoly status and then they can ratchet up the rates and soak up all that cash but essentially have a much more slave like labor force (The dream of the Neo-Liberal). But as a business plan it doesn't really scan as possible or make any actual sense. A competitor could easily just do the same thing once they jack up the rates again.

Second, There can't really ever be a rideshare monopoly because its just some Silicon Valley software that can be built by anyone. Right now "Businesses" like Uber and Lyft subsist entirely on an unlimited supply of venture capital and seem to do only two things, burn investors money and destroy Taxi drivers and skirt labor laws. I know people praise them as some so-called market leader but being a market leader isn't hard when you basically have unlimited venture capital, no actual legal regulations ever put upon you, if only MoviePass could have gotten this quasi-religious level of hype.

California should tell these people to leave and just never come back.

They're just an information app that connects people to reach a mutual goal, a way for people to make extra money and for others to save money. If you want a job then work for a taxi service.

[Lynarii]

I believe it was originally intended to be a simple ride-sharing app that allowed P2P transactions while the platform takes a cut. Similar to eBay, the sellers are not exactly employees but just users of the platform just like the buyers. With labor being involved, I can see the reasoning behind giving drivers benefits as employees.

If they are classified as employees, they will have to meet quotas as employees instead of just driving for Uber/Lyft whenever you want.

It probably was intended to just be that originally, but that isn't what it IS or has been for pretty much it's entire existence.

I also have absolutely zero sympathy for any company whose business model is "We need laws to not apply to us". Every company in every industry would like it if they were exempt from laws, but there's a reason why we don't have things that way.

[Deja Thoris]

I'm on the side of the drivers in this.

[Jotaux]

I'm ignorant of US laws concerning employees vs. subcontractors but if its anything like Canadian law I don't see how they can be employees.

They set their own hours
Use their own tools (the car)
Can refuse work
Can work for another company (When I was down there for blizzcon they were driving for lyft and uber at the same time)
Risk of loss or profit

[Gestopft]

They're just an information app that connects people to reach a mutual goal, a way for people to make extra money and for others to save money. If you want a job then work for a taxi service.

Woooow, Uber's propaganda actually works on people?

Also, good luck getting a job at a taxi service when they are being undercut by Uber and Lyft's ability to skirt the basic responsibilities of being an employer.

[Jotaux]

Woooow, Uber's propaganda actually works on people?

Also, good luck getting a job at a taxi service when they are being undercut by Uber and Lyft's ability to skirt the basic responsibilities of being an employer.

Thats really how they should target Uber and Lyft, a lack of a tax license.

[Edge-]

They're just an information app that connects people to reach a mutual goal, a way for people to make extra money and for others to save money. If you want a job then work for a taxi service.

Considering rideshare companies set rates for rides and compensation for drivers for those rides...no, not remotely. It's not, for example, a website to help people connect with contractors so they can receive bids for projects, where bid prices are set purely by the contractor based on the scope of work.

[masterhorus8]

I'm ignorant of US laws concerning employees vs. subcontractors but if its anything like Canadian law I don't see how they can be employees.

They set their own hours
Use their own tools (the car)
Can refuse work
Can work for another company (When I was down there for blizzcon they were driving for lyft and uber at the same time)
Risk of loss or profit

There's something extra in California regarding anyone that is performing the designed duty of the company, they need to be labeled as an employee.

[Ivanstone]

I'm ignorant of US laws concerning employees vs. subcontractors but if its anything like Canadian law I don't see how they can be employees.

They set their own hours
Use their own tools (the car)
Can refuse work
Can work for another company (When I was down there for blizzcon they were driving for lyft and uber at the same time)
Risk of loss or profit

Uber drivers can't refuse work actually. My dad has driven for Uber and he says that if a driver refuses pickups then the app will stop referring fares to them.

[Edge-]

Uber drivers can't refuse work actually. My dad has driven for Uber and he says that if a driver refuses pickups then the app will stop referring fares to them.

This is accurate. Also, if you drop too low in your ratings (as in like, to a 4 star review) you can get kicked off. You're absolutely not an independent contractor, the only thing you can really control is when you drive for them. Everything else remains under the control of the rideshare company, even including helping people get loans so that they can buy a car to drive for them. Which...ends up fucking those people over anyways and at least for Uber thankfully isn't a thing anymore - https://www.thesimpledollar.com/loan...ber-financing/

[Zan15]

I'm ignorant of US laws concerning employees vs. subcontractors but if its anything like Canadian law I don't see how they can be employees.

They set their own hours
Use their own tools (the car)
Can refuse work
Can work for another company (When I was down there for blizzcon they were driving for lyft and uber at the same time)
Risk of loss or profit

It's way more than that.
Look up the ABC test for independent contractors.
You will easly see why they should have never been classified as independent.

Uber knew this from day one

Hell they've been doing it to newspaper delivery folks for decades and Everytime they sue they win.
Class actions in a few states in the past 10 years cost them tens of millions.

I would also call their bluff on CA. They ain't going anywhere
If they leave the biggest market they open themselves up to a huge competitor joining the fight and gaining an immediate massive foothold

[Rasulis]

(Source)

First, how insanely badly-managed is Uber that is still fails to make any money despite having skirted all forms of normal regulations like minimum wage and health insurance laws and not having any capital expenses to speak of? I know I know, a lot is said about how Uber and Lyft and such are just trying to undercut cab companies to get to monopoly status and then they can ratchet up the rates and soak up all that cash but essentially have a much more slave like labor force (The dream of the Neo-Liberal). But as a business plan it doesn't really scan as possible or make any actual sense. A competitor could easily just do the same thing once they jack up the rates again.

Second, There can't really ever be a rideshare monopoly because its just some Silicon Valley software that can be built by anyone. Right now "Businesses" like Uber and Lyft subsist entirely on an unlimited supply of venture capital and seem to do only two things, burn investors money and destroy Taxi drivers and skirt labor laws. I know people praise them as some so-called market leader but being a market leader isn't hard when you basically have unlimited venture capital, no actual legal regulations ever put upon you, if only MoviePass could have gotten this quasi-religious level of hype.

California should tell these people to leave and just never come back.

From the very beginning, Uber and Lyft understand that the only way for them to become profitable is to take the people factor out of the equation. In short, Uber and Lyft will only become profitable when self-driving cars become reality.

[kail]

Uber drivers can't refuse work actually. My dad has driven for Uber and he says that if a driver refuses pickups then the app will stop referring fares to them.

If the app is running, sure. Your dad decides when he wants that to happen though. Want to drive just once a week? You can do that. Want to do it 14 hours a day for a whole month? Entirely possible. There is no minimum or cap to how much you can drive for Uber afaik.

- - - Updated - - -

This is accurate. Also, if you drop too low in your ratings (as in like, to a 4 star review) you can get kicked off. You're absolutely not an independent contractor, the only thing you can really control is when you drive for them. Everything else remains under the control of the rideshare company, even including helping people get loans so that they can buy a car to drive for them. Which...ends up fucking those people over anyways and at least for Uber thankfully isn't a thing anymore - https://www.thesimpledollar.com/loan...ber-financing/

The rating system is beyond stupid IMO.

Ultimately, if Uber and Lyft want to go with the "contractor" play, they should allow the drivers to set their own prices and operate with a cut on the transaction alone. It would be a ride selling platform that is more P2P. Users could look at different price ranges compared to the driver's car and distance and select which one they want. Or it automates its way from lowest to highest. ATM, Uber controls it all.

[Elegiac]

Knockoff cab service and their ignorant venture capitalist investors discover that the taxi has already been invented and there are reasons why they are so expensive. Shocking.

Also notice how a lot of these people are saying that Uber fucking over its employees is good, but once you have signed up on Patreon they are bound by divine law to continue platforming you or something something tortoise tortious interference.