A court ruling that could blow up Uber's business model

http://www.latimes.com/business/hiltzik/la-fi-mh-uber-s-business-model-20150902-column.html

by jackgavigan • 11 years ago

26 54 11 years ago

ClintFix• 11 years ago

"Uber almost certainly can thrive even if it pays its drivers more, and even if it picks up their expenses and pays them benefits like a genuine employer. It won't make as much money per trip, but its service may become more reliable instead, which could expand its market."

Well, if that's the case then forcing the change need not happen. If there is a financial or competitive benefit (better service and more reliable) to the company, it will either make the change voluntarily or a competitor will figure that out and eventually grow larger. If not, then your assumption is wrong.

Oh - nobody forces anyone to work with uber. They know what they're signing up for. They're not entitled to anything from uber except for what they agreed upon in the contract to work.

awa• 11 years ago

"Oh - nobody forces anyone to work with uber. They know what they're signing up for. They're not entitled to anything from uber except for what they agreed upon in the contract to work."

You can make the same argument against minimum wage, or any other abusive contracts (payday/predatory loans). A lot of time one of the party signing the contract has no other option depending on his situation, that doesn't mean a company/individual should be able to take advantage of his situation and get him in a tough bargain.

Also, not all contract signings are created equal, that's how a lot of companies sneak no-compete's which have been deemed unenforceable many times.

craigvn• 11 years ago

You are correct. People seem to assume the two parties signing a contract have the same amount of power. This is far from true.

dragonwriter2• 11 years ago

You can make the same argument against minimum wage, or any other abusive contracts (payday/predatory loans).

The people who make the argument against labor laws like the ones at issue with Uber often do make the same argument against minimum wage laws, or other laws restricting "abusive" contracts.

stvswn4• 11 years ago

I do make the same argument about minimum wage, and about "predatory" lending.

AndyNemmity• 11 years ago

I'm interested in how this could affect other business models that use independent contractors due to less responsibility.

Even more, what are all the benefits a company receives by using independent contractors vs. employees? Does anyone know that can list them? I realized I am not aware, I've been a salaried employee for 15 years.

nness• 11 years ago

It going to vary from state to state, and country to country, but usually it's a combination of reduced labor rights and decreased liability. Contractors often don't have union or collective bargaining rights, they aren't entitled to healthcare or superannuation (for countries with such a thing), and often have to handle all of their own personal liability insurance and payroll tax. They also have no sick, parental or annual leave entitlements (again, for countries with such things), overtime/weekend/award rates or other kinds of employment protection. The cost of a labor force the size of Uber's would be huge if they did it on an employee basis.

1024core2• 11 years ago

I admittedly don't take Uber too often. I have taken it maybe 10 times in my life. After the first time the "employee -vs- contractor" controversy broke out, I made it a point to ask the drivers: do you like Uber? What do you like about it? And to a man (all were men) they said they loved the fact that they could set their own hours, take off for something else whenever they wanted, etc.

Also, given the presence of cab companies, Lyft, etc., why does everyone think that Uber is "exploiting" the drivers?

InclinedPlane• 11 years ago

Yeah, Uber criticism seems to be an example of the old "perfect being the enemy of good" problem. Uber is extremely far away from being even remotely perfect, but the old system was built on a system of corruption, cruft, and abuse, it was mostly horrid for everyone except a tiny few. The fact that only now old taxi companies are scrambling to change and improve dramatically is a stunning indictment of the existing complacency and lack of competitive market forces.

zemvpferreira• 11 years ago

Asking service workers how much they like their employer is a less-than-perfect surveying tool. Why would they trash-talk Uber and risk getting a lower rating from you?

marincounty• 11 years ago

I have met very few people who will publicically critise their current employment, or current employment; no matter how terrible the job is? I guess it's denial? Or, just making the best if a bad situation? Or, just shutting up the nosey individual who needs to ask questions?

If Uber decides to become a fair employer; their will still be a maryiad a shifts workers will be able to choose from.

If they become a "Slumlord" employer, and abuse their employees, they will be just shooting themselfs in the foot?

Meaning the caliper, and quality of employee will fall to fast food establishment levels. Let's be honest, the real reason we used Uber is because we knew a person who kinda acted like us would show up at our residence?

mikeash2• 11 years ago

Most people aren't good actors. When they spend 20 minutes talking about how great Uber is and how much taxi companies suck and how much happier they are now (as I've had) it's pretty safe to say it's not just an act to somehow get a better rating.

henrikschroder4• 11 years ago

Why would anyone give a driver a lower rating if he talked crap about his employer?!?

1024core2• 11 years ago

So, I happened to take an Uber last night again. The driver was a guy who moves between cities: SF, LA (and one more, I think it was Sacramento). He was quite happy with the flexibility, that he could work Uber when he was between gigs. "Just turn on my app, start making money, turn it off when I'm done". No hours, no expectations. And he used to drive cabs; never again, he said.

Another data point: my barber (who I've known for 5+ years) told me that he's started driving Uber on the side. Before the shop opens, and if he has no appointments in the morning, he just starts giving rides. He also was very happy about the flexibility. It's a way to supplement his income.

I have yet to meet an Uber driver who feels "exploited" or taken advantage of. I really don't understand where this is coming from; my guess is it's the taxi industry? Which is ironical, since the taxi industry has been abusing drivers for decades with their medallion system.

henrikschroder4• 11 years ago

I saw an article a few days ago that I just can't seem to find again, that pointed out that many low-wage employers like Wal-Mart or Starbucks use sophisticated scheduling software to schedule a large amount of part-time workers such that they never work more than 29 hours a week (which would make them entitled to full-stime benefits), while making sure that staffing meets demand. Schedule changes can be very short notice, and if you as an employee can't bend yourself to fit the the company's demands, they'll simply fire you.

In contrast, the Uber model also mobilizes a large amount of low-wage workers, but never forces people to work when they don't want to, they simply use market incentives to make sure supply and demand gets balanced.

And people who are in these jobs vastly prefer the Uber model, because they are real people with real schedules, and working when it suits them best gives them agency and control over their lives, which is worth much, much, more than an increase in minimum wage.

henrikschroder4• 11 years ago

Found it: https://medium.com/the-wtf-economy/workers-in-a-world-of-con...

This must have been posted here?

stvswn4• 11 years ago

It's almost as if businesses react to economic incentives in predictable ways. I'm starting to think that well-intentioned policies may sometimes backfire.

tzs• 11 years ago

Walmart part time workers generally get benefits [1].

Walmart did drop benefits for about 30k workers who were working under 30 hours a week, but it turns out that was actually to benefit those employees [2]. Walmart's health benefits (for both full-time and part-time employees) are in the form of cheap insurance that the employee can purchase. For those 30k workers, the cheap Walmart plan still cost considerably more than the subsidized plans they could get on the ACA exchange if they were not covered by an employer plan.

[1] http://corporate.walmart.com/our-story/working-at-walmart/be...

[2] http://thinkprogress.org/health/2014/10/08/3577404/walmart-p...

vacri• 11 years ago

However, Uber just needs a pool of drivers. They're all completely interchangeable for a given location. This is not the same as a department store - you can't just pull an assistant off the floor and turn them into a cashier, for example.

Nor does a department store have the luxury of saying "There are a lot of customers in today, so we're charging three times as much for our goods, in order to get more cashiers in to service them".

enraged_camel• 11 years ago

So you've taken Uber maybe 10 times in your life, and started asking the question after the employee-contractor thing broke out, which was recent. What does that make your sample size? 2? 3?

jhartist• 11 years ago

The endgame for Uber is replacing their drivers with self-driving cars. The legal distinction of employee/contractor can only matter for what, 15-20 years until that happens?

stvswn4• 11 years ago

Exactly. The real minimum wage will always be $0, and we will only hasten the moment when self-driving cars are worthwhile investments if we continue to insist that labor should cost more.

0_00_02• 11 years ago

Good.

Shorel• 11 years ago

True, but that seems too far away.

jwatte• 11 years ago

If I wanted to build a legitimate middle man platform - solve contractor/customer match up, and intermediate payments, how should that service be built? Under the theory of this lawsuit, can such a service be built at all, or would it automatically look like an employer?

domdip• 11 years ago

You might start by following the "Independent contractor vs employee" guidelines. Of, say, California and the IRS.

http://www.dir.ca.gov/dlse/faq_independentcontractor.htm

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employ...

analog31• 11 years ago

One possibility is to find a market where the contractor is really a contractor. Nobody forced Uber to enter the cab business. They could match up contractor/customer payments for lawyers, Bobcat drivers, riverboat pilots, etc.

There are truck drivers who are owner-operators. How's that work? Something like that might be a good business to go into?

How do agents work in the music business?

secabeen• 11 years ago

It would look like a lead generation system with a payment module. You would direct interested parties to each other, and process payments as directed. What they actually contracted to do you would not track.

rayiner• 11 years ago

It looks more like EBay and less like Uber. The more you exercise control over prices, quality, and service, the more you offer a service instead of just being a middleman.

I take Uber several times a week. I think of it as the service. E.g. when the driver takes a shitty route, it's never been the driver's fault. They're just blindly follow the company-provided navigation. So I never leave a less than five star review and whenever I file a request for rate adjustment (maybe once a month), I take care to point out I'm blaming the app, not the driver.

tedunangst2• 11 years ago

Solution for Uber: allow drivers to set prices. I wonder how long that would last.

dakidd283• 11 years ago

yes you could just charge a membership fee to utilize the app

douche2• 11 years ago

I welcome any expansion of Uber service and availability, and oppose anything that supports the entrenched and terrible existing taxi services. I've only taken a handful of Ubers, but the quality of service is far higher. Moreover, it's the convenience that really wins out. Being able to see the GPS locations and ETA of an incoming Uber is far superior than calling a taxi and hoping they show up sometime close to when the dispatcher said they would. Not to mention that it's a completely friction-free experience - the driver arrives, you jump in, chit-chat a little on the way (Uber drivers are, in my experience, far more pleasant human beings that taxi drivers...), then you jump out, and they charge your card. No frigging around with change, or having to make sure you hit an ATM before you call the cab so you have cash on hand, or getting the evil eye because you didn't volunteer the unstated but expected tip on top of the exorbitant fare.

Taxi companies can die in a fire, for all I care. The last trip I took, I had to get about 10 miles from a train station to where I was going. The first leg, I caught an Uber, and it cost me about $13, in a clean vehicle, with a very pleasant driver. The way back, I had to take a taxi, and I spent $40 to ride with a driver who was kind of a dink, swerved all over the road, and drove a dirty, rattle-trap old Crown Vic. Uber uber alles.

chrismcb• 11 years ago

Uber is a taxi company... So it can die in a fire?

noarchy• 11 years ago

On a related note, how many IT workers here are working as "independent contractors", when they'd probably be considered employees if anyone took a close look? It seems to be very common where I am (Canada), to the extent that recruiters and the like seem to think nothing of it. You can be working side-by-side, with full-time employees, working the same hours, and answering to the same supervisor, but technically be working for yourself.

tsotha2• 11 years ago

In the US this has all been litigated, and companies know exactly how close to the line they can get without going over.

eitally• 11 years ago

This is very common in Brazil & Mexico, too (but not the US).

jdietrich• 11 years ago

In the UK, contracting has some very attractive tax implications for highly-paid workers. Our tax service has created a complex set of rules that distinguish a contractor from an employee.

https://en.wikipedia.org/wiki/IR35

aaroninsf• 11 years ago

I find it entertaining how people seem to have a hard time separating their personal satisfaction, as customers, from a defense of a business model which achieves much of its 'efficiency' by sidestepping the hard-won obligations employers have to their employees.

Calling someone a contractor, and pointing at 'work on demand' as if it were a silver bullet that slays those obligations, don't make it so.

pdq• 11 years ago

Here is what I don't understand. Uber is not supplying the cars -- the drivers are.

If you look at virtually any other "employee" field (trucking, taxis, etc), the company owns and maintains the fleet of vehicles, and the employees operate them.

Based on this, Uber drivers look more like independent contractors than employees.

dakidd283• 11 years ago

the cars could be considered a cool does a construction company provide a hammer or level

dakidd283• 11 years ago

the vehicle could be considered a tool such as a hammer for a carpenter or a pipe wrench for a plumber

douche2• 11 years ago

Unless you are an independent contractor, your employer should be providing your tools, if for no other reason than liability, should the employee be injured using substandard tools, which the employer would then be on the hook for.

0_00_02• 11 years ago

Really? I've seen tons of examples where the employee owns the vehicle. Pretty much every food delivery person I've met, plumbers, pool cleaning guys, cable installers, USPS mail-persons, all kinds of small businesses, etc.

oconnore• 11 years ago

from http://www.dir.ca.gov/dlse/faq_independentcontractor.htm : "an employer-employee relationship will be found if (1) the principal retains pervasive control over the operation as a whole, (2) the worker’s duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary"

1: Yes. They run the app, jobs come in through the app, progress is tracked through the app, payment is made through the app.

2: Yes. No drivers, no Uber.

3: Yes. Did you get from A -> B, and was the customer satisfied?

harryh• 11 years ago

Here's the thing that never seems to get mentioned in these stories. Aren't almost all yellow cab drivers contractors? And hasn't it been that way for decades? Isn't it kind of weird that Uber comes along and all of a sudden the rules (might) change?

A court ruling that could blow up Uber's business model

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