Uber Drivers Deemed Employees by California Labor Commission

>Uber alone sets prices

is the killer one. I guess the only solution to that would be to make it more of a market where drivers could choose their rate to compete.

http://www.edd.ca.gov/pdf_pub_ctr/de231tc.pdf [PDF]

Cites precedent in Santa Cruz Transportation v. Unemployment Insurance Appeals Board. Here's what's relevant to Uber:

1) Drivers could be terminated if they did not maintain good relations with the public.

2) The company required the drivers to account for the fares they received.

3) The work did not require the expertise of a skilled professional.

4) The drivers depended on the company’s dispatcher for their livelihood.

5) The drivers did not set their own rates, but were paid according to the number and distance of fares they carried.

6) There was no evidence of entrepreneurial risk.

7) The customers called the company and the company arranged for the performance of the services.

8) The drivers did not advertise their services.

9) The driver’s work was part of the regular business of the taxicab company.

1. We're not allowed to receive tips. 2. They take 20% of our commission anyways. 3. Who gets tipped here? Uber does, not me. 4. I use my own car, quite frequently, and unlike a pizza delivery guy, the valuable that I'm transporting is another person's life. 5. If I get into an accident, my insurance screws me. 6. I don't get paid enough.

Drivers absolutely choose their tools and invest heavily in those tools which directly impact their profitability and their ratings. Drivers absolutely employ managerial skill in deciding what hours and how many hours to work and what areas to drive in to get the best passengers and best ratings.

For example, the last Uber ride I took, the driver explained how they specifically avoid driving during certain time frames and certain locations because the fares are more likely to damage their tools, or leave poor ratings, or start yelling at them randomly.

> Uber exercises extensive control over vetting and hiring drivers...

For a pretty lose definition of 'extensive'. Nothing compared to a typical job interview and vetting process that a real hire goes through. How many dollars per contractor does Uber spend validating drivers? Probably averages to something like $25 - $50. There's a validation process, certainly, but it's hardly a "vetting" process.

> But for Defendant's intellectual property, Plaintiff would not have been able to perform the work

This is also absolutely not true. There are a number of different apps which would allow the plaintiff to perform substantially the same work using the same tools and the same business plan. But for using the Uber app, they would not be able to pickup Uber fares, obviously, but that's a tautology. They certainly would be able to perform the same work though. Or they could write their own app and perform the same work (obviously fighting the network effect, they may not succeed, but it's certainly possible).

The fact is that plaintiff can drop Uber on Monday and be driving for Lyft on Tuesday, or even drive for both concurrently and arbitrage between the two apps.

Personally I think this ruling goes too far, but it is a close call and it will be very interesting to watch this develop. The chicken farmer analogy is a good one. If Uber drivers are employees, it actually breaks a fairly large number of well established business models. I think this has more to do with push-back against Uber specifically than technical compliance with the law.

1) Chicken farmers own and provide equipment that (2) the parent company requires and has set standards.

3) The contractee chooses farmers based on some criteria(not certain, but I would assume it's fairly extensive).

4) Contractee sets prices; the farmers do compete with each other for the best pay based on quality, but the farmers do not set prices. Chicken quality could be seen as equivalent to Uber's pay based on hours/distance driven.

5)Chicken farmers do possess skills that influence Tyson's profit or loss, so this point differs.

6)I'm very much doubt that the farmers can subcontract.

7) The chicken farmers are vital to the contractee's business; the profit of Tyson and other companies that use poultry contracts depends primarily on the supply and quality of the chickens raised by the contracted farmers.

Overall, Uber drivers and contracted chicken farmers seem fairly similar though the chicken farmers may conform slightly more to the traditional contractor role.

I think the "ruling" is pretty silly. The Uber model is reasonable. Maybe some tweaks are needed but from a high level it's a legitimate approach.

1.) Agents are mandated to use their company logo and brokerage info in all ads, both by NYC law and by the company. Some companies have strict dress code requirements when meeting clients.

2.) The brokerage firm definitely controls the tools used, from internal databases to marketing syndication tools to in-house CRM systems.

3.) The brokerage firm has vicarious liability over the actions of their agents (also mandated by NYC law). For that reason the brokerage firm has a huge incentive to vet their employees.

4.) Agents generally have very little discretion if any on the commission charged. The brokerage firm sets commission policies and any deviations must be approved by the managing broker or associate broker.

5.) I highly disagree with the court ruling here [edit: administrative ruling?]; my understanding is Uber drivers are free to turn off the Uber app and operate without the source of leads generated, and that certainly impacts PNL (if that's not the case, agents still can't simply ignore leads forever without getting fired). Uber doesn't mandate when or where the work is done. Same with agents, the brokerages generally can't impact when or where the work is done, with the exception of some mandatory company wide meetings. Firms tend to provide desk space and equipment.

6.) An agent hired by a brokerage firm may not "subcontract" by having a friend show up in his place and conduct the work, even if the friend is a licensed real estate agent -- the brokerage, assuming vicarious liability for the actions of all their agents, would not allow it. This is different from an overworked agent asking a colleague to take over clients, both are still agents of the brokerage.

What do you make of the Berwick Enterprises wrinkle?

I very much enjoyed reading this (longish) piece by Nick Hanauer and David Rolf, "Shared security, shared growth":

http://www.democracyjournal.org/37/shared-security-shared-gr...

Uber's key innovation and disruptive influence is in the customer experience, and I look forward to them finding a way for them to focus on that without exploting technicalities in worker characterization.

Well that's a hilariously unbiased way of framing it.

That seems like a loaded way of phrasing the question.

They make some references to Case law for a Yellow taxi case back in 1991. (at least that was my reading!)

The ruling is embedded on the page.

The case law they cite: "In addition, even though there is an absence of control over the details, an employer-employee relationship will be found if the [Defendants] retain control over the operation as a whole, the worker's duties are an integral part of the operation, and the nature of the work makes detailed control unnecessary."

The ruling points out that this isn't as important as it appears. The example given in the ruling is that of a pizza delivery person. A delivery person is considered an employee of a pizzeria even if they are required to provide their own car and pay for their own gas and insurance.

Also, Uber provides drivers with an iPhone (though they don't have to use it).

"Plaintiff's car and her labor were her only assets. Plaintiff's work did not entail any 'managerial' skills that could affect profit or loss. Aside from her car, Plaintiff had no investment in the business. Defendants provided the iPhone application, which was essential to the work. But for Defendant's intellectual property, Plaintiff would not have been able to perform the work."

That's a pretty solid line of reasoning, to be honest. Note that for those unfamiliar with the subtleties of legal jargon, the words "but for" have a specific meaning that relates to causality. In other words that last sentence roughly translates to "if not for the existence of the iPhone app there would be no distinct or independent business here."

In addition, earlier in the ruling they address the fact that mere ownership of a car has historically not been considered the same thing as owning specific "tools" required to perform a job, and it cites the fact that previous precedent for delivery drivers that they are employees, and merely owning the car and paying for gas does not change that.

I think there's a very good argument for Uber having to treat the drivers as employees. They are dependent on Uber and Uber sets the amount they will earn. They would more likely be contractors if the drivers set their own rates and Uber would choose who they wanted to drive. Doesn't Uber also try to restrict who they can drive for too? Additionally, Uber's business relies entirely on the labor of the drivers. Uber also supervises the employees in-part by the rating system.

In terms of buying their own equipment - this is not an uncommon thing in many trades. Mechanics have to buy their own tools. Many machinists buy their own tools.

Truth is there is a lot of gray area here but I can see interpretation both ways. I do hope the drivers in California take this opportunity to organize as quickly as possible and begin collective bargaining with Uber.

I'd set Uber's value at less than one billion if this happened.

Not true. I know someone who drives for Uber. Just last month, he was suspended because he did not want to drive during low-demand hours (when he literally loses money). Uber drivers are, in fact, required to (a) work when they don't want to and (b) work specific hours.

Is it? If this were to remain, the large majority of the drivers will not have a position to fill. It will not be viable.

>That is, Uber has realized significant margin gains by pushing all risk of carrying passengers and car maintenance onto its drivers

No one has 'pushed' anything. Drivers are consensually agreeing to drive because the pay they receive values their time.

>Therefore, this risk is transferred to either drivers (who are on average mot equipped to handle this risk)

How are they not equipped?

>Now, what society is really missing out on is an opportunity or reason to transition from employer-based benefits to government or society-based benefits. This ruling will postpone a public discussion on the role of employer-based insurance and benefits.

What society needs is less people forcing them to do what others think is best.

This is really revolting to me. And outlines what my intuition feels is wrong with most SV 'disruption'. Its just so immature. While I don't agree with your later sentiments, the risk shifting is dead on.

This ruling will have quite little effect on that conversation. The political situation in this country has already decided that conversation shouldn't happen yet.

This was my reaction as well. If Uber drivers feel that they don't have access to typical benefits like good healthcare, life insurance, disability insurance/workers comp, etc. then it would seem that one solution is to make these things easily available to people who are not full-time employees. And that would help millions of non-Uber citizens as well.

Another solution is what the court is ruling here, to force Uber to take on the complexity and cost. I can't see how this could actually be better for anyone involved in the long run. Uber will just raise their cut of the fares to cover the costs of benefits so drivers won't actually take home more money. I suppose it'll get a lot harder to fire drivers so maybe some will benefit from that?

In any case, I honestly feel like it would be more reasonable if this driver could sue the state of California for not making benefits easily available to 1099 workers. Hopefully Obamacare will open up the Overton Window[0] and this is the way things are heading in the future

[0] https://en.wikipedia.org/wiki/Overton_window

Of the many factors preventing that I think this ruling is a pretty minor one.

Please excuse my demeanor, but it means that if the "sharing" economy is really the "tech companies sidestepping worker/labor protections with no repercussions", then society is screwed.

Honestly, the fundamental situation is not new, only the particulars are novel.

And if you are looking for a ride and Uber has 80% chance of having the closest available car then you are probably willing to pay a premium to use their service.

You can see multiple people stating the same here about driving for multiple services: http://qr.ae/7y7fv7

I think this is just another ruling by a clueless government that has no clue what is actually happening on the computers involved.

No, Uber does not "control every aspect of the business". Specifically, it doesn't control when you work, where you work, how you work (obviously not the route taken), the conditions of the vehicle (beyond that it is legal), etc.

It's going to be hard to make that stick when the entire business model of these companies is based on avoiding as much personal, social, and corporate responsibility as possible.

The real question is political - should we consider this kind of entrepreneurial activity a good thing, when its effects are so uniformly negative for most of the population?

And that's an old question - who should benefit the most from the social value created by work, and why?

At the moment the game is rigged to reward those who are motivated primarily by greed and self-importance. I'd suggest that's not just an unintelligent way to do these things, it's also a really expensive way - because the value of the missed opportunities created by lost economic activity and lack of broad spectrum prosperity is almost unimaginably huge.

Why do you want government and politicians to enter the game?

Uber pays for commercial insurance for it's drivers. See http://newsroom.uber.com/2014/02/insurance-for-uberx-with-ri...

Uber is a bad investment.

In essence, AirBnb is just a broker.

With Uber, you don't rent Wissam's driving services for 20 minutes or hire Samantha to pick you up at SFO. You hire Uber and they dispatch a faceless anonymous cog.

For Uber to fall into AirBnB status, you'd be able to rate drivers, and drivers could request to pick you up, and you'd choose a driver amongst those available. That's not what happens. Uber would have less control.

There is much more involved here, but the decision is fairly easy reading.

4-6 are madly different for airbnb than Uber:

4) Uber alone sets prices, and tipping is discouraged, so there is no mechanism for driver (as "contractor") to set prices. 5) Plaintiff driver only provided her time and car. "Plaintiff's work did not entail any 'managerial' skills that could affect profit or loss." 6) Drivers cannot subcontract (presumably negating Uber's position as a "lead generation" tool for contractors).

AirBnB is facing an entirely different challenge - residential vs commercial zoning, hotel taxes, impact on the normal rent market, etc. I'm seeing laws coming up either seeking to regulate & tax them as hotels, or outright ban them as in santa monica: http://www.npr.org/sections/thetwo-way/2015/05/13/406587575/... Clearly a residential rental market isn't sustainable when you can easily earn at least double with short term rentals.

That said I'd be interested to know the break down between host involvement/room etc and "entire place" because Airbnb seem to have sold a lot on the host element and there's arguably a major commitment to the guest by a live in host. Also things like superhosts [0] which clearly aren't employees but come a bit closer to blurring the lines.

I think the ebay seller analogy mentioned might be best though - Airbnb hosts set the price freely, approve/reject at will, can make individualised offers, earn trust and Airbnb - like ebay - call out without employing (and supposedly without endorsing) highly trusted hosts.

[0] https://www.airbnb.co.uk/superhost

It isn't terribly surprising that they can offer cheaper service than incumbents by avoiding the costs of the incumbent. The technology problem they solved is very convenient, but I'm not sure that contributes significantly to the lower costs.

Taxi companies could then get rid of their own dispatchers (gotta be a significant savings right there), their own radio network, and the per car radio transmitters. Plus the rating system would help cab companies identify crappy drivers.

Customer would still get the convenience of hailing and paying for a cab via a smart phone. Plus the rating system could be used to ensure that if a customer gave a driver/car a bad rating that customer would never see that driver/car again.

Uber per transaction gross would be smaller... but they could enter many more markets much faster, have a significant legal services savings (i.e. they wouldn't be sued anywhere near as often), and possibly a savings on marketing (no longer need to market to drivers and customers... only need a sales team that targets taxi companies). And insurance savings... Uber wouldn't need to provide car insurance during trips. And HR savings... the hiring and vetting of drivers remains with the taxi companies.

And many taxi companies do have apps similar to Uber. At least in the populous areas of the States.

ps - are you aware that in American English, your username is a rather offensive racial epithet?

If, by that, you mean the ride-hailing app -- the main part that isn't challenged as an evasion of either taxi laws or labor laws -- they are (e.g., the Flywheel app.)

Not as much visibility, because it doesn't have the dedicated capital and media attention flowing into it from being "disruptive".

Well, the same applies to child-labour sweatshops that make shoes...

- Uber has to take on a lot more of the associated risks (in practice that means paying a lot more insurance)

- Uber has to pay benefits to their drivers and ensure that their hourly wages meet local minimums

EDIT: Or, Uber has to change the way it operates so that it can continue to treat its drivers as contractors.

In practice, their entire business model is built around externalizing all their costs and shoving them onto their drivers.

Currently the National Taxi Workers’ Alliance does not have any collective bargaining rights as they represent a non-traditional workforce. Taxi cab drivers are not covered under the Fair Labor Standards Act which protects workers’ safety and grants overtime pay.

The requirements that uber enforces on its (now) employees would pretty much have to be wiped to make it more of a contractor relationship than an employee relationship. No more banning 2-door cars or 11 year old cars, no more banning tips, no more auto-filtering out all less than perfect records, drivers would have to negotiate fares not uber, no more background checks. Basically uber does a traditional hiring process without actually hiring, whereas they'd have to move to a traditional contracting relationship. Uber forbids contracting relationships in their ToS, its specifically forbidden to hire a subcontractor. Clauses like that really set off labor boards and the IRS about "fake" contracting.

Specifically, uber would have to let the end user decide not to accept a ride in my new 2-door Yaris or my wife's 2004 Prius rather than denying for me. Also if riders consistently give me 1 star because of my HN posting habits or whatever, they'd have to let the riders decide to not accept me rather than autofiltering out all sub 4.6 or whatever grade-inflated score they use. They couldn't run a background check on me to join the service, MAYBE they could get away with running it and putting the result semi-anonymously online for the rider to make a judgement. They would have to let me set the minimum fare I'd demand, which actually sounds pretty nice for drivers rather than existing "yes/no" take it or leave it, and tips would have to be permitted.

Possibly they could spawn off a "union" or professional organization that only allows members to join that passed a background check and then only allow members to advertise themselves as part of the union. Like my roofing contractor or my unionized electrician.

There's a widely held belief, that is completely wrong, that a contractor is just an employee who is treated like dirt in exchange for more money than an employee gets; essentially a gambling relationship. The actual legal position is considerably more complicated and is not concerned with popular beliefs.

http://www.irs.gov/pub/irs-pdf/i1040sca.pdf

Shifting the expense burden to employer instead of employee creates wrong incentives, e.g. one can then choose to deliver on a Hummer instead of a Prius, because maintenance/fuel is paid for by someone else.

Furthermore, their earning potential doesn't instantly vanish. They just compete with existing transportation companies on more even terms.

They have a vastly superior product; there's no reason why they won't continue to be widely successful.

They get compensated via driving. Which is why they drive in the first place.

Why forcibly stop people consensually partaking in an activity? It's amazing how far away bureaucrats can tell others what's best for them.

Definitely not going to happen in the near future.in 5/10 years maybe, but it looks like Uber is racing to make as much money as possible before the legislator cracks down on it. If the the decision of the commission is confirmed, they'll have to change their business model ASAP. They can do it, they have a shitload of money.

So the Uber hate comes about because the idea is they are cheating. The drivers' POV is not considered; Uber holds Job Giving Magic and they have to be fair with that power. Proving a service that is in demand is not enough- They have to constantly thank us that we permit them to offer us their service. That's the idea.