9 ms·

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

26 points by jackgavigan 11y ago

ClintFix 11y 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 11y 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 11y 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.
    - tsotha 11y ago
      How is it not true in Uber's case?
  - dragonwriter 11y 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.
    - masterleep 11y ago
      Indeed they do, and they are right to do so.
      - hwstar 11y ago
        Employers have too much power in the asymmetrical employer/employee relationship. In order to counteract this and level the playing field, there must be minimum labor standards enforced by the state. I know that a lot of right-leaning Americans think that government should stay out of private contracts, but they'd be dead wrong. If the employee was just as powerful as the employer, then the situation would be different.
        stvswn 11y ago
        I think you're giving yourself the ability to reason along the spectrum, but assuming that more libertarian leaning people are incapable of admitting that some standards are OK. Of course some standards are OK, it's these standards that we object to. Workers need to be protected from unsafe working conditions, sure. Minimum standards aside, there's no reason to cast Uber vs. drivers as a Marxist class struggle when the Uber drivers themselves seem to be satisfied with the arrangement.
        dragonwriter 11y ago
        > Minimum standards aside, there's no reason to cast Uber vs. drivers as a Marxist class struggle when the Uber drivers themselves seem to be satisfied with the arrangement. (1) The existence of the lawsuit means that the generalization serving as the explicit premise here is incorrect. (2) Without defending Marxist class struggle as a valid or correct framework for addressing reality, the idea that the drivers seem generally satisfied with the arrangement is relevant to whether characterizing it as a Marxist class struggle is necessary may reveal a poor understanding of the entire idea of Marxist class struggle and particularly the role of class consciousness within such a struggle.
  - stvswn 11y ago
    I do make the same argument about minimum wage, and about "predatory" lending.
AndyNemmity 11y 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 11y 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.
1024core 11y 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 11y 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 11y 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 11y 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?
jhartist 11y 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?
- deleted 11y ago
  [deleted]
- stvswn 11y 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_0 11y ago
    Good.
- Shorel 11y ago
  True, but that seems too far away.
jwatte 11y 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 11y 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.dir.ca.gov/dlse/faq_independentcontractor.htm http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employ...
- analog31 11y 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 11y 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 11y 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.
douche 11y 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 11y ago
  Uber is a taxi company... So it can die in a fire?
noarchy 11y 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.
- tsotha 11y 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 11y ago
  This is very common in Brazil & Mexico, too (but not the US).
- jdietrich 11y 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 https://en.wikipedia.org/wiki/IR35
aaroninsf 11y 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 11y 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.
- dakidd28 11y ago
  the cars could be considered a cool does a construction company provide a hammer or level
- dakidd28 11y ago
  the vehicle could be considered a tool such as a hammer for a carpenter or a pipe wrench for a plumber
  - douche 11y 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.
    - tedunangst 11y ago
      But you don't stop being an employee just because you don't get those things. If I work at Google and one day they take away my work computer, I don't magically become a contractor just like that.
- 0_00_0 11y 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 11y ago
from http://www.dir.ca.gov/dlse/faq_independentcontractor.htm 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 11y 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?

26 points by jackgavigan 11y 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 11y 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 11y 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.
  - tsotha 11y ago
    How is it not true in Uber's case?
- dragonwriter 11y 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.
  - masterleep 11y ago
    Indeed they do, and they are right to do so.
    - hwstar 11y ago
      Employers have too much power in the asymmetrical employer/employee relationship. In order to counteract this and level the playing field, there must be minimum labor standards enforced by the state. I know that a lot of right-leaning Americans think that government should stay out of private contracts, but they'd be dead wrong. If the employee was just as powerful as the employer, then the situation would be different.
      - stvswn 11y ago
        I think you're giving yourself the ability to reason along the spectrum, but assuming that more libertarian leaning people are incapable of admitting that some standards are OK. Of course some standards are OK, it's these standards that we object to. Workers need to be protected from unsafe working conditions, sure. Minimum standards aside, there's no reason to cast Uber vs. drivers as a Marxist class struggle when the Uber drivers themselves seem to be satisfied with the arrangement.
        dragonwriter 11y ago
        > Minimum standards aside, there's no reason to cast Uber vs. drivers as a Marxist class struggle when the Uber drivers themselves seem to be satisfied with the arrangement. (1) The existence of the lawsuit means that the generalization serving as the explicit premise here is incorrect. (2) Without defending Marxist class struggle as a valid or correct framework for addressing reality, the idea that the drivers seem generally satisfied with the arrangement is relevant to whether characterizing it as a Marxist class struggle is necessary may reveal a poor understanding of the entire idea of Marxist class struggle and particularly the role of class consciousness within such a struggle.
- stvswn 11y ago
  I do make the same argument about minimum wage, and about "predatory" lending.

AndyNemmity 11y 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 11y 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.

1024core 11y 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 11y 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 11y 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 11y 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?

jhartist 11y 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?

deleted 11y ago
[deleted]
stvswn 11y 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_0 11y ago
  Good.
Shorel 11y ago
True, but that seems too far away.

jwatte 11y 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 11y 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.dir.ca.gov/dlse/faq_independentcontractor.htm http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employ...
analog31 11y 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 11y 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 11y 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.

douche 11y 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 11y ago
Uber is a taxi company... So it can die in a fire?

noarchy 11y 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.

tsotha 11y 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 11y ago
This is very common in Brazil & Mexico, too (but not the US).
jdietrich 11y 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 https://en.wikipedia.org/wiki/IR35

aaroninsf 11y 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 11y 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.

dakidd28 11y ago
the cars could be considered a cool does a construction company provide a hammer or level
dakidd28 11y ago
the vehicle could be considered a tool such as a hammer for a carpenter or a pipe wrench for a plumber
- douche 11y 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.
  - tedunangst 11y ago
    But you don't stop being an employee just because you don't get those things. If I work at Google and one day they take away my work computer, I don't magically become a contractor just like that.
0_00_0 11y 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 11y ago

from http://www.dir.ca.gov/dlse/faq_independentcontractor.htm 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 11y 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?