Uber drivers, if employees, owed $730M more: U.S. court papers
reuters.com
reuters.com
There are a lot of labor abuses out there in America that I wish would get attention, including contractor classification, but I'm not sure this is one of them.
People talk about reimbursements for gas and mileage which they'd be owed if employed. But dont they know this to be the case beforehand and still accept the terms?
I think people are seeing these valuations based on potential (platform, automation, etc.) and perceive it to be based on current services model and thus feel left out of the future windfall.
In any case, drivers have an expiry date in the not too distant future, so grab what you van now.
* Yes, they'd have to hire / refer / recommend a financial planner / accountant / or "not financial advice"
* Any sort of non voluntary training could be construed as breaking the consulting relationship - but then again, franchises do this often as a b2b setup.
Lets say Newber (a new disruptive Uber competitor) starts up to explicitly conform to the independent contractor regulations.
Newber drivers set their own prices, which are then published on Newber's app (sorted by some formula accounting for location + costs). When a passenger looks for a driver, they see the list of prices available, and then call the one that has the best price. Newber collects a small fee for the successful listing.
In contrast, Uber sets the prices on both ends. Without the independence to set your own prices, Uber is closer to an employee/employer relationship than the classical Taxi models.
If a Taxi driver is given the car to drive, given set hours... seems like they are more an employee than an Uber employee picking his own hours and using his own car.
see https://www.irs.gov/Businesses/Small-Businesses-&-Self-Emplo...
The only reason I see to have this reclassified is not based in observable behavior but rather based on wanting to extract more favorable terms for working which is fine, but I don't see much material difference between a taxi driver and a driver for one of these platforms which would require a reclassification.
"A taxi driver, operator or lessee is an employee unless such person is leasing a taxi from the owner of the taxi and the owner of the taxi personally, regularly drives the taxi an average of 40 or more hours a week. For the lessee to be considered an independent contractor, the owner-operator may not control, direct, supervise, or have the power to hire or fire such lessee."[1]
That seems to line up well with the IRS guide on determining if someone's role is an employee or contractor.[2]
That is the trouble though...the rules aren't black and white. They are roughly a sum of various measures of "degree of control/independence".
[1]http://www.wcb.ny.gov/content/main/onthejob/CoverageSituatio... [2]https://www.irs.gov/Businesses/Small-Businesses-&-Self-Emplo...
They both have a lot of flexibility and let people work any time of day or night. But, Uber has much tighter controls on work location and performance. Where a cab company only cares if service is terrible and someone calls to complain, Uber wants more than that and fires people for so-so performance.
In the end Uber pretends to be setting up a market, however they act like drivers are employees.
As a complete aside, I think it's somewhat bogus for Uber to describe themselves a market. They use market-like mechanisms, but ultimately they set price. The price isn't something consumers and suppliers have input on. Drivers and consumers can decide to take or leave it. I think it's stretching the definition to call it a market. They just gave drivers the same sort of take it or leave it option as most businesses give consumers.
The legal distinction between contractors and employees is legal semantics.
Yes. A big part of the legal distinction between contractors and employees is the degree of control over the manner of performing the work.
The law aside, that should be irrelevant. If amazon sets the price of their digital streaming offerings (let's say they want to uniformly set all movies to be $10/view for the first weeks then $5/view after opening) would the movie studios be subsidiaries" of amazon, and would the gaffer that worked on making that movie be an "employee" of amazon?
The contractor still has the option to accept (or not) the price point that is offered.
Also, Payroll taxes are regressive IMO.
I am not sure I agree here. Can you elaborate on how Uber has tighter controls on work location and performance?
For reference, here is Uber's Driver Deactivation policy for the US:
> https://www.uber.com/legal/other/driver-deactivation-us-engl...
Much of what is in it seems to be in line with what I expect from a company trying to maintain a healthy marketplace.
Perhaps you can elaborate on some points where Uber has acted like drivers are employees so I can be better informed?
Star ratings are again a black mark. A gruff driver who plays loud music, but safely drives from A:B still preformed the work. Requiring more than what is directly required to do the job is problematic. An actual marketplace should show low star drivers as long as they uphold a defined minimal standard and users may still pick them. This also rolls back to price, a market place should let high star drivers charge more not ban lower star drivers. This even rolls into the perception it's marketed as people using 'Uber' not connecting people to drivers.
One of the best signs someone is a subcontractor is the ability for them to pay someone else to do some or all of the work. If Uber let other company's onto their platform and users could pick one of several 'Joe's Cabs' which all share star ratings that would be a marketplace.
All together if you compare Uber to say Amazon's marketplace, Apple's iOS store, a stock market, or a Flee market it's clear Uber is doing something else.
Ah, I can see that. On one hand though, Uber needs to avoid the "ghost driver" situation where riders open the app and see cars that they cannot actually "hail" so-to-speak. I could see how this would create a negative market experience for riders...but perhaps acceptance rates aren't the best/most unbiased metric for quantifying this?
> Star ratings are again a black mark.
I don't know about this. Driver quality/rider experience are part of creating a marketplace attractive to potential riders. If drivers are giving riders bad experiences, their return to the market becomes circumspect. Quality control also isn't a new thing for market places, to further your Amazon parallel: https://sellercentral.amazon.com/forums/thread.jspa?threadID...
> If Uber let other company's onto their platform and users could pick one of several 'Joe's Cabs' which all share star ratings that would be a marketplace.
Now that is an interesting concept! Allowing drivers to band together and present themselves as a collective would be an interesting Quality Control mechanism. But I don't know if this is malicious on Uber's part so much as the market vision they have is limited (e.g. individual drivers to fares). This might be because of the historical origin of Uber which was targeted towards facilitating "jobs" for private drivers.
I think you have some really good points, but I, personally, am still not sure I 100% agree when you say Uber is not creating a marketplace...somewhat because I see a lot of parallels to Amazon's marketplace where you see a lot of differences :)
I don't really want to defend Uber, I have a moral distaste for Walmart type wage avoidance...I just am not sure if I consider Uber NOT a marketplace. I also have a very incomplete picture so I will keep an eye out for more details about this particular line of reasoning.
Thanks for the clarification!
This is flatly false. Uber publishes available fares in real time, drivers choose to accept them or not. This is the entire premise of Uber. You might as well say that radio cabs "dispatch work to drivers", but it's exactly the same publish-subscribe model: central publishes an available fare, drivers compete to respond quickly accepting the fare based on their willingness and also their proximity, (the latter of which is judged by central).
The acceptance rates are a red herring: Uber says "if you're rarely going to accept a fare while you have the app in a state saying you're generally available, I'm not interested in listing you as potentially available to customers". I don't see how this creates a control-of-work-time, control-of-work-undertaken, control-of-hours-worked, or control-of-work-place relationship, which are the bases of the IRS classification.
Uber lets drivers choose when, where, how-much, and how-often they work... and they're totally fine with how-often being once-a-month. Uber is also fine with you working 3 other jobs that overlap in hours with the time you might allocate to Uber (i.e. no control-of-exclusivity).
The thing they won't let you do is: frequently list yourself as available, then repeatedly decline nearby available fares -- and yet still expect to be listed as generally available while you have the app open saying your'e generally available. Shut off the app when your'e not generally available within your geo proximity, and the acceptance rate problem goes away entirely.
Taxi companies frequently use the independent contractor model for their businesses. All of the larger taxi companies in Phoenix lease their cab out for a flat rate, and they don't care if the driver uses the vehicle to work the company's fares. All the old taxi drivers that I know have private clients - customers who call them directly for transportation.
Uber-X drivers can't legally build up a private clientele unless they also have commercial insurance and have paid the state's fee for vehicles-for-hire. But that doesn't mean they don't give out cards anyways
That is not how the law defines employee. It has to do with the employer providing tools, and setting schedule.
> Uber-X drivers can't legally build up a private clientele unless they also have commercial insurance and have paid the state's fee for vehicles-for-hire.
And? What does that have to do with Uber? Just because they can't use their car to make money without Uber doesn't mean they are an employee of Uber - it just means Uber provides them some business leads.
As a lyft driver, I also made money from uber. I also made money contract coding, sometimes even doing work while in my car pulled over during off time.
If anything the taxi model is more exploitative, reminiscent of the 'company town' era when the employee rented their living space and tools from the company.
> I have stopped driving as of July...
... because you got tired of being exploited by the venture capitalists?
https://www.irs.gov/Businesses/Small-Businesses-&-Self-Emplo...
Everything about this screams employer/employee relationship.
Uber wants the benefits of being an employer, but none of the costs or responsibilities. They're going to ride their way to the top on the backs of their workers--get rich now and pay a few fines later.
Justice will never be served for Uber.
Indeed. I learned this the hard way.
Like you said, it's a gray area and applying the IRS 20 Questions does not yield an exact black & white determination of contractor vs employee. The drivers have hybrid attributes of both contractors and employees. In some ways, the Uber drivers are like "contractors" such as hair salon stylists, Hollywood stuntmen, fashion models, magazine photographers, etc. On the other hand, they are like "employees" such as UPS/FedEx/pizza drivers.
>It sets requirements for cars, rates and "fires" drivers, etc.
I've boldly said it before and I'll boldly predict it again: it is much more likely that Uber will tweak its "control" rules to act more like ebay/craigslist/AppleAppStore rather than switch to an employee model that pays for minimum hourly wages, worker's comp, health benefits, liability insurance, etc. The auction sellers and the iPhone iOS programmers uploading apps are not "employees" of Ebay and Apple and it's much more realistic for Uber to relax some rules to be more like Ebay rather than be more like FedEx.
Why? Because we (the riders) won't pay for the higher fares (probably more than 2x the costs) to fund an employer/employee model.
If Uber did switch to a more expensive "employee" organization, a new competitor that deliberately structured itself more like Ebay/Craigslist and utilized true "contractors" as drivers would undercut them. Riders en masse would pick the cheaper fare from a contractor rather than the 2x fare for an Uber employee.
I think some observers confidently think that Uber will ultimately lose the "employee" classification legal battle and there will be a financial windfall for the 160,000+ drivers. For the reasons I stated above, that is not going to happen.
I don't see how Uber changing their behavior for the future prevents them from having to cover what they should have been providing in the past.
As for the specific lawsuit, the current settlement of $100m that the drivers' attorneys favor doesn't change the classification to "employees". The $100m is not the "now-we-are-employees" type of money.
But even if the settlement is approved, it doesn't mean that that Uber has put the employee classification problem totally behind them. Other states and more lawsuits will be filed to keep the pressure on. My previous reply is predicting how Uber will play the game to avoid having 160000 employees if the forces calling for employee classification become too great.
We really need a third classification here and then a debate about what rules we should have around this classification.
Practically speaking though a great many people would see that as a rollback of worker protections so I'd be shocked to see a change in that direction.
For example, instead of asking "is alcoholism really a disease?", you should be asking "Will it accomplish anything if I rebuke an alcoholic for drinking?" or "Are there medicines that will result in someone not drinking so much, with tolerable side effects?"
So what is labor law trying to accomplish with the contractor/employee distinction? I don't have a good answer. As best I can tell, it's trying to meet two criteria:
A) Ensure that legit independent businesses can exist and not be shut down for failing to pay themselves enough; and
B) Ensure that, if you make someone economically dependent on you, you cancel out that dependence (sick pay, unemployment, worker's comp), just like we do for parental obligations, child support, alimony, and torts.
Sadly, it turns out, the law commits the Noncentral Fallacy by acting as if everyone fully in one category or the other, so your "balance of factors" puts you squarely on one side or the other. A better way would be to require more "cancel dependence"-type benefits as someone becomes increasingly "employee-like" in the sense of becoming dependent.
But I'm open for other explanations of the law.
[1] http://lesswrong.com/lw/e95/the_noncentral_fallacy_the_worst...
This is the problem with people casually suggesting that workers would be better off with mandated benefit x, y, or z. As long as Uber can still cut their portion, it can even out. (Or worse, if workers value the benefit less than the equivalent cash.)
See the concept of tax incidence: just because someone is charged more, doesn't mean any specific factor has a different take-home. https://en.wikipedia.org/wiki/Tax_incidence
Surely if they were classified as employees instead of as contractors it would come with an accompanying pay decrease. If they decided to drive for Uber at the previously agreed rate as a contractor, wouldn't they also have accepted the job with a $730M pay cut if it came with a $730M reimbursement of their expenses?
It sounds like they want to get paid for certain things twice.
Isn't all that tax deductible? Uber pays the drivers, and then the drivers will have to pay back the government since they can't claim it as a tax deduction anymore. Meanwhile, Uber gets the deduction and gets a tax refund.
There has to be more to this than just mileage expenses, right? Otherwise it's a huge legal bill for a simple accounting shift.
EDIT: Nevermind - I was confusing tax deduction with tax credit.
A tax deduction is not the same thing as a tax credit.
(I had initially said they were fungible, but it only works one way)
IOW, fewer drivers would probably join on from seeing "Make $30/hour [gross]!" than e.g. "Make $15/hour + expenses!"
That $70 difference for the drivers is a lot more than an accounting shift.
Uber saves $30 on their corporate income tax but they have to pay out $100 to the driver so are also out money.
They are employees because:
- Uber drivers can be fired.
- They can't set up their own rates.
- Have to follow several conditions.
They are not employees:
- Because they define their own working hours
- They have no boss (though they can be 'fired' by the company)
By the way, can drivers choose their rate?
No
Libertarians tend think Uber is an example of the free market doing a better job than a highly regulated one. Other people think Uber is an example of the free market abusing labor more than a highly regulated one. If we agree that both are true to some extent, then I guess the next step is to find language for comparing those apples and oranges. (How should we measure consumer benefits, and how should we measure abuse, and then how much benefit is worth X additional abuse?)
yodanews.com
But I suppose those drivers that want to remain independent contractors could just register an LLC and then contract with Uber. Probably the most sensible so they could use multiple platforms too.
Then California gets $800 per year per driver for the privilege of running an LLC. Not a bad strategy for the state. Squeeze the company, the employees and the contractors all at the same time.
But until we do it is disingenuous to pretend there aren't actual issues raised by Uber's attempt to evade that system.