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Uber Drivers Deemed Employees by California Labor Commission

• dylanjermiah 11y ago
  "Uber is said to have more than a million drivers using the platform across the globe." If this ruling sticks, many of those drivers will no longer have a position.
  • mayneack 11y ago
    This, at least, will only affect the California workers, right?
    • dylanjermiah 11y ago
      I presume so, hopefully other cities do not follow.
    • jkyle 11y ago
      If the damages incurred are high enough, it effects uber as a whole. And so effects all their workers.
    • anigbrowl 11y ago
      This ruling, yes. But there is a similar ruling in place in Florida and there may be a federal decision on the horizon IIRC.
    • dragonwriter 11y ago
      Strictly, this ruling affects one worker. If it is appealed and eventually decided by a court whose decisions are binding precedent -- and the first stage appeal from the Labor Commissioner's ruling would be a state trial court, which is not such a court -- then it would have broader effect. OTOH, its likely a guide to how the Labor Commission would rule on similar cases brought by other Uber drivers, so, in a sense it signals an effect in California, without having a direct effect on any other worker. ISTR reading about a Florida decision that found the same thing with regard to Uber drivers, and IIRC there are a number of other labor complaints and lawsuits pending on similar grounds.
  • davexunit 11y ago
    Ah yes, the old "if we can't continue screwing you, you won't have a job!" argument.
  • s73v3r 11y ago
    If Uber is just going to take it's ball and go home like a spoiled child, then there was nothing of value lost.
• bhouston 11y ago
  What is the expected cost to Uber of this change?
  • revelation 11y ago
    Bankruptcy.
  • shivpat23 11y ago
    If this sticks, Uber cannot absorb that cost and would have to shed many of the drivers - rendering Uber, as we know it now, defunct.
    • yincrash 11y ago
      Uber does exist in more than just California.
      • ceejayoz 11y ago
        The IRS exists in those other areas, though, and may take a similar look at their operations.
    • gav 11y ago
      UberX is now defunct in Los Angeles at least, I assume they've shut it off for all of CA. No cars available this morning.
  • tomasien 11y ago
    They're appealing so we'll see.
  • ceejayoz 11y ago
    Minimum wage (probably including time you're available but without a fare), overtime, payroll tax, workers comp... and back-pay for all that for the last few years? Enormous, I'd imagine.
    • toomuchtodo 11y ago
• mikeryan 11y ago
  I think Uber can maybe weather this storm but I wonder how this will trickle down to the smaller personal service players like TaskRabbit/Caviar/Luxe etc who employ independent contractors.
  • toomuchtodo 11y ago
    If the IRS determines the same, Uber will be on the hook for back taxes and penalties for all of its US drivers. I don't think Uber can weather that storm.
    • mikeryan 11y ago
      There's a lot of nuance there however and a big if (on a federal determination). Its also not in the IRS's best interest to put Uber out of business. Even assuming the worst it seems likely that there would be some sort of compromise brokered that would allow Uber to stay operational. They've got a pretty big war-chest to work with.
      • toomuchtodo 11y ago
        > Its also not in the IRS's best interest to put Uber out of business. Why? Uber has shown they're a terrible company when it comes to following regulations. If anything, I would assume the IRS would take a more critical eye towards them, allowing Google's self driving vehicle program to get a head start. Disclaimer: My opinion is "self driving cars are the future, but f* Uber"
        • mikeryan 11y ago
          Why? Uber has shown they're a terrible company when it comes to following regulations. Look the IRS is a revenue generating organziation. Saddling Uber with a 100 billion dollar tax bill will get them a bankruptcy proceeding and $0. Finding a way to collect some percentage of what's past owed and then having them pay, at least, payroll taxes moving forward can bring hundreds of millions of dollars into the IRS's coffers. I'm not a huge fan of Uber's business practices either but killing them does the IRS no good.
• nugget 11y ago
  I wonder -- if Uber converted drivers in California to employees and dealt with the increased costs (passing them on to riders) but also prevented the now-employed drivers from driving with competing services (Lyft) -- whether the company wouldn't actually become even more valuable than they already are. If you are driving for both services but Uber comprises 80% of your volume and Lyft 20%, it's an easy decision to make. Given that the real asset for all these sharing economy companies is their elastic work forces (drivers and cars for Uber, residents and homes for Airbnb), the CLC may have just created an entrenched monopoly without realizing it. Beyond that there is a really interesting debate as to whether sharing economy jobs are an end-run around minimum wage laws, rendering such laws meaningless for certain industries going forward. If the majority of workers are turned into 1099 consultants, but are doing effectively the same jobs (drivers, delivery people, etc) that employees did in the past, what does that mean for society?
  • tomasien 11y ago
    There are a lot of downsides to drivers for this potentially, even beyond preventing them from driving for competing services. They also may be forced into working certain hours, which would be horrible for many Uber drivers who aren't doing it full time. I'm worried!
    • viola11 11y ago
      The could equally well be forced to work certain hours before as well, by Uber deciding to just give fares to them during certain times.
    • s73v3r 11y ago
      Uber punishes drivers for not working enough hours and taking enough fares in the first place.
  • toomuchtodo 11y ago
    > Beyond that there is a really interesting debate as to whether sharing economy jobs are an end-run around minimum wage laws, rendering such laws meaningless for certain industries going forward. If the majority of workers are turned into 1099 consultants, but are doing effectively the same jobs (drivers, delivery people, etc) that employees did in the past, what does that mean for society? 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.
• Karunamon 11y ago
  So let me get this straight: * People sign up with Uber * They drive literally whenever they want * Uber has no standards for their drivers other than "get good ratings" and "pass a background check" ..and they're considered employees? WTF?
  • jayess 11y ago
    California.
  • randomname2 11y ago
    There's many more reasons for them not to be considered employees, which is why this ruling is so puzzling and why they're appealing.
    • therobot24 11y ago
      Whether the judgement is correct or not, they're appealing because it's in their best interest.
  • ceejayoz 11y ago
    Uber has standards for their drivers, listed in the linked complaint. Vehicles have to be specific model years, specific models for Uber Black etc., and well maintained. Can't ask for / accept tips.
    • Karunamon 11y ago
      That doesn't really rise to the level of specifying how a work product must be produced (one of the main differences between employees and contractors), only some prerequisites. (They won't even let you drive if you don't have a >2004 4-door vehicle)
      • DannyBee 11y ago
        "That doesn't really rise to the level of specifying how a work product must be produced (one of the main differences between employees and contractors)," Can you please cite any case law for this proposition? PS there is a ton of caselaw on what it means for a taxi driver to be an employee or not, and this isn't in there :)
• tomasien 11y ago
  I'm curious to read this argument. For all the hand wringing over Uber drivers as 1099 workers, they seem to be the very definition of contractors. They provide their own equipment, keep their own hours, NEVER have to work if they don't want to and 0 consequences for working or not working specific hours, etc. What is it about them that makes the employee like? Anyone know? Edit: it appears that the critical factor they considered was whether or not the driver could have operated their business independently of Uber. They said they could not. They also cited the fact that Uber controls the way payments are collected and other aspects of operations as critical to showing employment. http://www.scribd.com/doc/268946016/Uber-v-Berwick http://www.scribd.com/doc/268946016/Uber-v-Berwick
  • ChuckMcM 11y ago
    I haven't read it but perhaps they ran afoul of the 'same manager, same job' over 6 months which tripped up Microsoft?
  • majc2 11y ago
    I've had a quick read, the argument seems to be that because the driver is needed to fulfil Uber's rides that they become indistinct from Uber as a business itself; so they're employees. They make some references to Case law for a Yellow taxi case back in 1991. (at least that was my reading!)
    • kohanz 11y ago
      Essentially: "No drivers, no Uber". Makes sense.
      • CPLX 11y ago
        Also, "no Uber, no driver" in this specific case at least.
      • k0 11y ago
        California Über Alles
      • 11y ago
• joshjkim 11y ago
  You can estimate how much this will cost Uber in CA as follows: $0.56 multiplied by total miles driven by UberX drivers over all time. It’s almost as simple as that, since damages were given out almost entirely on those grounds. I'll leave it to HN to figure out a guess on mileage =) Some other interesting notes: Plaintiff was engaged with Uber from July 23 to Sept 18, less than 2 months (p 2) She worked for 470 hours in that time, so quite a bit (p. 6) Damages broken down as follows: $0.56/mile reimbursement, for a total of $3,622, tolls for $256, interest of $274, for a total of $4,152 (p10) Claims for wages, liquidated damages and penalties for violations were all dismissed (p11)
  • joshjkim 11y ago
    Side note: the $0.56 is an IRS number, and therefore federal, so could even be used as a proxy for all US =)
• ThomPete 11y ago
  Considering that Uber eventually is going to replace them all with self driving cars I think it's only fair that the people who help making Uber so valuable gets part of the spoils of being in a company that grows this fast. I am assuming this also means healthcare.
  • dylanjermiah 11y ago
    >I think it's only fair that the people who help making Uber so valuable gets part of the spoils of being in a company that grows this fast 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.
    • bdcravens 11y ago
      Then remove the tips restriction.
    • hiou 11y ago
      Because in an economic downturn an enormous 1099 based workforce would cause serious shock to the economy as they do not qualify for unemployment benefits to smooth the transition as it did in the last downturn. For examples, take a look at what happened in economic downturns prior to the creation of said benefits. It's a lot more complicated than libertarian idealism unfortunately.
    • stevewilhelm 11y ago
      Actually, the citizens of California enacted the laws; the bureaucrats are just enforcing them. Uber has the right to appeal if they feel the bureaucrats are enforcing the laws incorrectly. The judicial branch reviews Uber's complaint and will decide one way or the other. Democracy; it's a pretty nifty system.
    • lmm 11y ago
      Because the employer-employee relationship is not an equal one. We've seen the race to the bottom that happens in the absence of labour regulations.
• codegeek 11y ago
  Isn't Uber concept similar to AirBnB ? DOes this mean AirBnB users are also at risk of being classified as employees of Airbnb ? Uber, you drive your own car. Airbnb, you rent your own apartment.
  • jonwachob91 11y ago
    And sellers on eBay too...
  • Shivetya 11y ago
    well it depends, some taxis in California are union, TPAC pretty much hates Uber, so what better way to kill the competition. So do hotel staff unions feel threatened by AirBnB? doubtful, the numbers are just to small. The threat to AirBnB is politicians who want tax money
  • cvburgess 11y ago
    Uber customers are paying the driver for a service, AirBnB customers are renting an asset - they break down differently from my understanding of the law but IANAL
  • ceejayoz 11y ago
    I'd say no. If AirBnB hosts provided housekeeping during the stay it'd probably be comparable. AirBnB's business model is closer to a rental car than a driver service.
  • acveilleux 11y ago
    I wouldn't think so. In AirBnb, the hosts retain control over availability, pricing and make decisions. In addition, while you use AirBnb to book, you book from a person (moral or physical) directly. 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.
  • jasonlotito 11y ago
    No. AirBnB, from my understanding, doesn't require AirBnB users to provide X features. If AirBnB required users to offer high-speed internet, a personal TV, and a separate way in and out, then you start going down the path Uber went, which is part of what caught Uber up here. 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.
• mayneack 11y ago
  This makes all the R&D into driverless cars worth it. Driverless cars can't be employees.
  • jkyle 11y ago
    I'm not sure the uber contractors would think that's a benefit.
    • gegtik 11y ago
      *employees
      • thrillgore 11y ago
        In one state.
  • josefresco 11y ago
    Exactly. This is the equivalent of Netflix mailing DVD's and transitioning to streaming. If Uber can pull it off they'll survive the regulatory assault.
    • cehrnrooth 11y ago
      Not necessarily. As other people have pointed out, Uber's business model, margins, and valuation are based on shifting their costs onto their drivers (especially the capital costs of vehicles). Switching to driverless raises the question of who owns the vehicles they'll be using, and if they're the ones owning the vehicles in their fleet that represents a major shift in capital expenses and ongoing maintenance costs.
      • josefresco 11y ago
        Good point about ownership of the vehicles. Maybe it's more of an "insurance" policy in case their regulatory battles go poorly. I think if cities and states had to choose between Uber with people (more jobs) and Uber with autonomous vehicles (less jobs) they would or should pick the former.
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• beatpanda 11y ago
  I hope this spells the end of labor exploitation as an "innovation" strategy by "technology" companies. It's getting sickening.
• phpdeveloperfan 11y ago
  I'm surprised this happened, though I feel like it'll be appealed heavily.
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  • dylanjermiah 11y ago
    Terrible for drivers, and riders and Uber.
• todd3834 11y ago
  I was asking about this a little while back and no one chimed in: https://news.ycombinator.com/item?id=9551467 https://news.ycombinator.com/item?id=9551467
• beering 11y ago
  Skimming through the doc, court findings are: 1) Drivers providing their own cars is not a strong factor - pizza delivery employees also drive their own cars. 2) Uber "control the tools that drivers use" by regulating the newness of the car. 3) Uber exercises extensive control over vetting and hiring drivers and requires extensive personal information from drivers. 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). Sorry that these are out of order. Look on Page 9 of court documents for full text.
  • fillskills 11y ago
    Thanks, now it makes sense to me. Lot of these points ring true, specifically 3 and 4
  • heimatau 11y ago
    Thanks for the breakdown. Sounds like a solid explanation. I wonder what other states/nations will do. This could affect the business model of Uber dramatically by increasing their costs and liabilities.
    • sillygoose 11y ago
      > This could affect the business model of Uber dramatically by increasing their costs and liabilities. All those costs are precisely why Uber wanted contractors instead of employees. The real problem is that hiring actual employees is way more costly and risky than hiring contractors.
  • djm_ 11y ago
    Out of all those, >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.
    • 11y ago
• Dwolb 11y ago
  This is a good ruling for workers, but maintains society's status quo. That is, Uber has realized significant margin gains by pushing all risk of carrying passengers and car maintenance onto its drivers. Therefore, this risk is transferred to either drivers (who are on average mot equipped to handle this risk) or insurance companies (who pass the costs on to their entire insurance pool) and not borne directly by Uber nor its customer base. By classifying drivers as employees, risk becomes better aligned. 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.
  • dylanjermiah 11y ago
    >This is a good ruling for workers, 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.
    • WaxProlix 11y ago
      Found the American libertarian. You hit all the talking points in a few sentences; now that's efficiency the government can only dream of!
      • dylanjermiah 11y ago
        If you have a constructive comment to add, please feel free.
• jkot 11y ago
  Does it not complicate things for drivers as well? As employees they may have to tax entire income from Uber, including car expenses, maintenance etc..
  • breischl 11y ago
    I believe you can still deduct work-related expenses. That's what Line 21 "Unreimbursed Employee Expenses" on the 1040A is for, if I'm reading the instructions correctly. http://www.irs.gov/pub/irs-pdf/i1040sca.pdf http://www.irs.gov/pub/irs-pdf/i1040sca.pdf
• zekevermillion 11y ago
  surely Uber is prepared for this eventuality and has a strategy ready to go
  • acveilleux 11y ago
    The first of which is probably to appeal and stall as long and as far as the law allows.
• aikah 11y ago
  Oops ... here goes Uber's competitive advantage ...
  • prodigal_erik 11y ago
    Have taxi companies managed to get a driver to actually show up when you call? I thought Uber's advantage was not being completely dysfunctional, even when they only had expensive town cars.
    • emodendroket 11y ago
      Yes, and so have livery services.
• bdcravens 11y ago
  Won't this mean that every single "employee" covered by this will have to file amended tax returns?
  • facetube 11y ago
    ...and potentially get thousands of dollars in employer-paid FICA and payroll tax back, assuming it sticks (which is a big if).
• nemo44x 11y ago
  Just throwing a hypothetical out there. What if this sticks and the drivers decide to organize with a union and collectively bargain a living wage, benefits, etc? What would be the value of Uber (and related businesses)? Would it stay in business even? How many VC's would lose fortunes over Uber going nearly to 0? Would this be the popping of what some suspect is a private equity bubble as the effects of this ripple throughout? Regardless, it would be a very different business with a very different valuation.
  • mcafeeryan92 11y ago
    My thought on this is that the current Uber valuation is related very strongly to the idea of their future worth, which is currently quite optimistic due to their self-driving car research. Uber without having to pay drivers at all is still the end-goal for them, so it may just mean that they need more capital investment in the short-term and investors may be happy to do so.
    • nemo44x 11y ago
      I don't believe self driving cars will be practical in the next 10 years. Not at the level Uber would benefit. I don't understand why self driving cars are good for Uber. Uber is successful right now due to he network effect of their drivers. Once self driving cars are a reality you will see numerous offers for this service with all of them racing to the bottom. Bigger fish like Apple and Google would be able to siege them and starve them out as pricing races to the bottom. Uber is valuable because of their drivers, not despite their drivers. In the age of self driving cars - Uber won't be able to compete.
      • deckar01 11y ago
        The data Uber is collecting from their app will be very valuable once they start using self driving cars. Google may have a lot more data coming in from Maps, but it is noisy and unfiltered. Uber has a geospatial history of every ride along with the metadata needed to make it truly useful.
• jellicle 11y ago
  This was obvious from the beginning. There's really not the slightest doubt that all government authorities are going to classify Uber employees as employees, except perhaps a few that might be bribed/pressured into not doing so. Uber controls every aspect of the business, from the fares charged (and how much profit Uber will take from each) to the route taken to the conditions of the vehicle to preventing subcontracting. It isn't even close or arguable. As the ruling points out, these people aren't independent drivers with their own businesses that just happen to have engaged in a contract with Uber, nor could Uber's business exist without them. The short version: http://www.irs.gov/uac/Employee-vs.-Independent-Contractor-%E2%80%93-Seven-Tips-for-Business-Owners http://www.irs.gov/uac/Employee-vs.-Independent-Contractor-%...
  • pbreit 11y ago
    I think mostly the opposite. I don't think the ruling holds tightly or sees broad copying. 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.
    • s73v3r 11y ago
      They control the important aspects of the business. They control the pricing, they control how the drivers work, they control the condition of the vehicle (can't have an old vehicle, must be newer), and they exert control over when drivers work by punishing those that turn down too many fares.
      • pbreit 11y ago
        The pricing, yes, although Lyft explicitly supports tipping and Sidecar actually enables differentiated pricing. Vehicles can be 10 or mor years old which is the vast majority of vehicles on the road (i.e., hardly "control"). And, yes, lights and seat belts must work (that's hardly control). They exert literally zero control over when you work. If you're going to open up the app and start declining fares, that's equivalent to a contractor turning in shoddy work.
• steven2012 11y ago
  The ruling is not unexpected at all. After the ruling against Microsoft back in the 90s on contracting, it's pretty clear that a business needs to be very careful how they hire contractors, so that they don't become implicit employees. Google has to jump through hoops so that their contractors aren't considered employees (only work for 1 yr max, etc). I'm curious how much this will affect Uber and what it will do to their business model. If I had to speculate, it would be that it becomes unprofitable almost instantly, but they do have a gigantic warchest, so maybe they can fight the ruling or figure out another way to classify their drivers. Maybe they can advertise fares and jobs ("This person wants to be driven from SFO to Mountain View") and drivers bid on it like an auction. I wonder if that might change the equation? But then it means that drivers will have a lot more friction in the process.
  • sjg007 11y ago
    They will do tips. They will do a time sensitive auction. They will set a minimum bid (by the customer).
• hiou 11y ago
  Curious to see what the public markets will do in response. Nasdaq is taking a bit of a slide as we speak.
• brentm 11y ago
  This feels like an inevitability at their scale. Outside of the tech world it was always going to be hard to sell their labor pool as contract when put under the microscope.
• c-slice 11y ago
  Who is Rasier LLC? This seems to be some sort of shell corp for Uber's insurance.
• encoderer 11y ago
  Drivers are just temporary anyway. Uber is going to be the company to beat when autonomous cars make Autos as a Service a huge business. I see that, and not some low-margin package delivery service, as the driver of their future growth.
  • nemo44x 11y ago
    Uber won't be able to compete in the age of automated drivers. Uber is successful because of their drivers, not despite them. The network effect of having the most drivers lets Uber maintain its dominance in the market. Autos as a Service will be a race to the bottom and there will be a smaller gateway to entry than there is now. Uber is a bad investment.
    • icebraining 11y ago
      It's not a race to the bottom if you also control a non-commodity, like the software driving the car. And it just so happens that Google has a large stake invested in Uber.
      • neura 11y ago
        Yes, this is exactly the point. The situation is going to be that Google will be in control and Uber will be a thing of the past. Google has the money to enter the automated taxi game. Uber does not have the money to compete with Google. They may get lucky and profit from Google just buying them up, but that's about it.
    • encoderer 11y ago
      You act like it's a big binary shift one day. But it's not. Uber has massive consumer mindshare, and its still growing fast. When they start phasing-in self driving cars you will have a day where your UberPool ride to work was driven by a human, but your UberPool home happened to be an autonomous car. Uber is building a brand as the go-to transportation service and that won't be displaced just because another company deploys a fleet of autonomous cars with their own app. Even if that company is Google. Sure, it's a competitive threat, and I have no idea if Uber will be a brand people know in 25 years. But in 5-10? I think they are positioning themselves for dominance as the provider of autonomous transportation.
• louithethrid 11y ago
  Ueber always was a desert flower. The field it disrupted was scheduled to vannish with automated cars anyway.
  • 16bytes 11y ago
    Which is why it's one of the biggest investors of those automated cars. Investors see this and will continue to fund them. 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.
    • toomuchtodo 11y ago
      > Which is why it's one of the biggest investors of those automated cars. No, Google is. Google has poured more money into self-driving car technology than even auto manufacturers and Bosch. > Furthermore, their earning potential doesn't instantly vanish. They just compete with existing transportation companies on more even terms. Uber is nothing special. There is no stickiness. They are the Tinder of the mobility space. People will use whomever is the cheapest and meets their standard. > They have a vastly superior product; there's no reason why they won't continue to be widely successful. Unless they're forced out of existence through legislation and taxation. It doesn't matter if you're a tech startup if you don't own the roads. Atoms != bits.
      • 16bytes 11y ago
        > No, Google is. I didn't say they were the biggest, but they are one of the big boys. They just opened a huge robotics facility in Pittsburgh and yoinked dozens of staff from CMU Robotics. They are betting big on automated transportation. > People will use whomever is the cheapest and meets their standard. Right. I will continue to use Uber/Lyft because it's cheaper/faster than regular cabs. Heck, I'd even pay a slight premium because it's so convenient. Have you even used regular taxis in a non-metropolis area? It sucks. Even with employee drivers, Uber will be fine.
• DannyBee 11y ago
  This should be 100% not shocking to anyone (including Uber, i expect). Given their recent executive hires, i'm sure they saw this coming, and already have an appeal strategy. From a legal standpoint, riding the edge rarely works. Look at what happened to Aereo.
  • icebraining 11y ago
    Taxi companies have been riding it for decades. 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.
    • DannyBee 11y ago
      This is not riding the edge at all. This is explicit in the FLSA, see 29 U.S.C. §213(b)(17), which exempts (from overtime)“any driver employed by an employer engaged in the business of operating taxicabs.”
  • bsder 11y ago
    Aereo is a really bad example to cite since it looks very much like they were simply lying through their teeth rather than riding the tech edge.
    • DannyBee 11y ago
      ???? AFAIK, they were playing the edge of the law, and lost.
      • bsder 11y ago
        They claimed that they were receiving the public signals on their tiny little antennas which were significantly under the quarter wavelength that you need to receive them. While maybe possible, the science and engineering were continuously obfuscated (for no really good reason--since this kind of advance would be very patentable and profitable), and they never actually produced a convincing demonstration that they were doing what they actually claimed. If they were actually doing this, they were skirting the edge of the law. In reality, they seemed to be receiving the signals on a single big antenna elsewhere, and then copying from that signal. This is quite clearly illegal in current law, and is what they actually got slapped for.
• yueq 11y ago
  What are the impacts to Uber if drivers are employees?
  • titanomachy 11y ago
    The most important changes would be that - 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.
  • s73v3r 11y ago
    Theoretically very little. There's a decreased profitability, but not much else. Presumably their tech was what set them apart, and so it shouldn't matter whether their drivers are employees or contractors. In practice, their entire business model is built around externalizing all their costs and shoving them onto their drivers.
• bickfordb 11y ago
  If all California Uber drivers become employees, wouldn't Uber be on the hook for reimbursing past Uber drivers for all past vehicle expenses?
  • prostoalex 11y ago
    Why, even the pizza delivery jobs quoted in the decision do not reimburse vehicle expenses. 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.
• jussij 11y ago
  The only problem I have with Uber is they get away with not having to compete on a level playing field. I live in Sydney Australia and catch a fair few taxis. That taxi diver I use has to pay many $100,000.00 to buy a taxi plate just to work (or work for someone who has bought such a plate), but the same Uber driver does not have such an overhead. Also, that taxi has to pay insurance in case I'm injured while I'm in their cab, another cost the Uber driver does not have to cover with an insurance policy. So government has to decide, does it want to eliminate those costs and make it a level playing field, making it an effective free for all. But why politicians will never do that is because the first crash with the resulting insurance claim will bring the industry to it's knees and from that point on all hell will brake loose. At present the politicians just don't want to make a decision because it is just a little too hard.
  • cosmolev 11y ago
    So you have full control and it's up to you to choose whether you pay more for the being insured and ride with a plate or pay less and ride Uber. Why do you want government and politicians to enter the game?
    • s73v3r 11y ago
      Except he doesn't, because there are more people on the road besides just him and the Uber driver. See, this is what the libertarian types constantly forget: You are not an island. Your choices do not happen in a vacuum.
  • woah 11y ago
    Uber cannot be applauded enough for sidestepping the legalized monopoly and bribery of "plates" or "medallions".
    • bigdubs 11y ago
      There is a reason the cities regulate the number and type of cabs on the road; too many cabs leads to increased congestion being one reason. It is also important to license cabs and certify the drivers of said cabs. The main reason though, is so that there isn't a glut of taxi drivers chasing a fixed rider pool and ensures that drivers can make a decent living off taxi driving. The plate/medallion system gets out of hand when non-driver entities (read, taxi companies) can own the medallions and buy large quantities of them and lease them out at a profit, driving up the barrier of entry.
• grellas 11y ago
  A few thoughts: 1. This is an appeal from a decision by a hearing officer of the California Labor Commissioner. Most of the time such officers spend their days hearing things such as minimum wage claims. Hearings do not follow the strict rules of evidence and are literally recorded on the modern equivalent of what used to be a tape casette instead of by a court reporter. Such hearings might run a few hours or, in a more complex case, possibly a full day as the normative max. The quality of the hearing officers themselves is highly variable: some are very good, others are much, much less than good in terms of legal and analytical strengths. In a worst case, you get nothing more than a pro-employee hack. The very purpose of the forum is to help protect the rights of employees and the bias is heavily tilted in that direction. That does not mean it is not an honest forum. It is. But anything that comes from the Labor Commissioner's office has to be taken with a large grain of salt when considering its potential value as precedent. Hearing officers tend to see themselves as those who have a duty to be diligent in protecting rights of employees. Whether what they decide will ever hold up in court is another question altogether. 2. Normally the rules are tilted against employers procedurally as well. When an employer appeals a Labor Commissioner ruling and loses, the employer gets stuck paying the attorneys' fees of the prevailing claimant on the appeal. This discourages many employers from going to superior court with an appeal because the risk of paying attorneys' fees often is too much when all that is at stake is some minimum wage claim. With a company like Uber, though, the attorney fee risk is trivial and all that counts is the precedential value of any final decision. It will therefore be motivated to push it to the limit. 3. And that is where the forum matters a lot. The binding effect of the current Labor Commissioner ruling in the court is nil. The same is true of any evidentiary findings. The case is simply heard de novo - that is, as if the prior proceedings did not even occur. Of course, a court may consider what the hearing officer concluded in a factual sense and how the officer reasoned in a legal sense. But the court can equally disregard all this. This means that the value of the current ruling will only be as good as its innate strength or weakness. If the reasoning and factual findings are compelling, this may well influence a court. Otherwise, it will have no effect whatever or at most a negligible one. 4. What all this means is that this ruling has basically symbolic importance only, representing what state regulators might want as an idealized outcome. Its potential to shape or influence what might ultimately happen in court is, in my view, basically negligible. 5. This doesn't mean that Uber doesn't have a huge battle on its hands, both here and elsewhere. It just means that this ruling sheds little or no light on how it will fare in that battle. You can't predict the outcome of a criminal trial by asking the prosecutor what he thinks. In the same way, you can't predict the outcome here by asking what the Labor Commissioner thinks. In effect, you are getting one side of the case only. 6. The contractor/employee distinction is highly nebulous but turns in the end on whether the purported contractor is actually bearing true entrepreneurial risk in being, supposedly, "in business." There are a number of factors here that do seem to support the idea of true entrepreneurial risk but that just means there are two sides to the argument, not that Uber has the better case. 7. In the end, this will be decided in superior court and then, likely, on appeal to the California courts of appeal beyond that. It will take years to determine. In the meantime, the Uber juggernaut will continue to roll on. So the real question will be: should we as a society welcome disruptive changes that upset our old models or should we use the old regulations to stymie them? Courts are not immune from such considerations and, as I see it, they will apply the legal standards in a way that takes the public policy strongly into account. It will be fascinating to see which way it goes.
• reviseddamage 11y ago
  Despite this, Uber will still take over the taxi industry, albeit perhaps a bit slower. The quality control over all its components that Uber exercises will continue to bring market attraction to its services and will keep winning market share.
  • Marazan 11y ago
    That depends on the cost of actually compiling with employment law. Once they are no longer avoiding costs by illegally ignoring regulations and laws their profits might vanish.
    • s73v3r 11y ago
      If that's the case, then it turns out their improvements weren't that valuable.
• a-dub 11y ago
  To be clear, this is not new regulation. This is a hearing that weighed the facts against the current set of laws as they are written. Under those laws, they're pretty clearly employees. Changing the existing laws is a different issue entirely. There are serious pros and cons on both sides and the right answer is not obvious.
• smiksarky 11y ago
  Control is the key factor when determining a 1099 vs W2 employee. FedEx has been doing this for many years...which is why they just got fined a shit-ton. I think Uber drivers will just unionize within the near future causing all of their future driving 'employees' to get paid more - thus cutting profits - resulting in either a new business model which is again bending the new rules, or back to the way things were in the good ol' yellow cab.
• Spearchucker 11y ago
  Uber and Lyft are operating a model that clearly works for customers. And yet they rightly face legal issues. The thing that perplexes me is that existing taxi companies, who are licensed and otherwise compliant with the law, don't adopt the best parts of Uber and Lyft? Why can't I call a black cab in London the way I call a ride from Uber?
  • seehafer 11y ago
    They're trying that in SF. It's called Flywheel. And it's more expensive than Uber and not as good of an experience, because you have no power to rate down poor drivers.
    • s73v3r 11y ago
      Rating poor drivers has limited benefit, as I don't believe taxi drivers are allowed to turn down fares.
    • gmisra 11y ago
      This is incorrect, after every ride you have the opportunity to rate your experience on the same low information 1-5 star scale as Uber. It's more expensive because the cost is not subsidized by VC capital, and the rates are regulated in order to provide wage floors for the drivers (amongst other things). Not everybody values minimum wages, but it's worth knowing why the cost is higher.
  • jonlucc 11y ago
    > Uber and Lyft are operating a model that clearly works for customers. And yet they rightly face legal issues. 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.
    • Spearchucker 11y ago
      Hey this is anecdotal, be warned - many of my friends (all of those with kids) say they'd be happy to pay more for the peace of mind. To most of them the illegalities of Uber and Lyft are hazy, if not opaque. But they all know things aren't entirely kosher.
• 6d6b73 11y ago
  If the ruling holds, Uber is finished. It will have to play by the rules set by the same rules any taxi company has to follow.
• rebootthesystem 11y ago
  A point is being lost here in major way: We need to, as much as possible, get government out of our homes and businesses or they will continue to bury us under so much muck that we'll asphyxiate. Seriously, what the hell does government have to do with the relationship between me and my source of income. I should be able to do whatever I want, whenever I want to and at whatever rate I choose to work for so long as it isn't illegal in some fundamental way (fraud, theft, murder, burglary, etc.). Beyond that they should stick to painting white and yellow lines on the roads and changing light bulbs on road signs, thank you very much. It is just incredible to see how our own government looks for every possible angle they can find to destroy progress. I am not defending Uber and their practices. I've never used the service (troed but not available where I am). I am simply using them as an example of a fantastic innovative company trying to find a better way to do something and, instead of our government helping facilitate the exploration of solutions that could advance society and make life better, simpler, healthier, whatever, they become our own worst enemies. Who the hell do they think they are? They work for US. We don't work for them. We are not their slaves. Folks, wake the fuck up. Next election you need to send a solid message to everyone in government that they better truly start working for us or they are gone. The way you do that is to support moderate Libertarian candidates. Moderate is the key here, the extremists on any party are friggin insane. WE NEED TO REDUCE GOVERNMENT TO A MINIMUM OR THEY ARE GOING TO KILL US OFF. Look at what is happening here in California. We are going to BURN a hundred billion dollars (likely more) building a joke of a high speed train to nowhere and NOBODY is stopping it. Why? Because you are watching government greasing unions to gain votes and favors. The whole thing is sick beyond recognition.
  • s73v3r 11y ago
    No. Just no. There is absolutely nothing in this ruling that justifies your rant. Uber is not special, they are not doing anything unique, and as such do not justify having special treatment under the law. There is absolutely no reason why Uber shouldn't have complied with the law from day one. Further, I don't see why I should be upset at this ruling making it harder for rich companies to shift more and more of their expenses on working class employees. If anything, even if we reduced the scope of government, this is still something they should be doing.
• chx 11y ago
  You all downvoted my comment three weeks ago: Uber is constantly trying to run from the law but eventually the law will catch up with them and finish this farce. Good. Well, there you have it.
• randomname2 11y ago
  Reuters and Techcrunch may have jumped the gun here. This ruling only applies to a single driver. Reuters has updated their headline accordingly now: http://www.reuters.com/article/2015/06/17/us-uber-california-idUSKBN0OX1TE20150617 http://www.reuters.com/article/2015/06/17/us-uber-california... Uber's response: "Reuters’ original headline was not accurate. The California Labor Commission’s ruling is non-binding and applies to a single driver. Indeed it is contrary to a previous ruling by the same commission, which concluded in 2012 that the driver ‘performed services as an independent contractor, and not as a bona fide employee.’ Five other states have also come to the same conclusion. It’s important to remember that the number one reason drivers choose to use Uber is because they have complete flexibility and control. The majority of them can and do choose to earn their living from multiple sources, including other ride sharing companies.' – Uber spokeswoman
• shawnee_ 11y ago
  Beekeeping analogy: both über and lyft are hives. The California Labor Commission's ruling does more to preserve hives in general (and thus the well-being of bees (drivers) as a whole), rather than any specific hive. Yeah, it's making things a little harder on one specific hive right now, but maybe this just means more hives will be popping up. It's the right call. The phenomenon in nature is for bees to switch hives if theirs is in demise. "Any worker bee that is bringing in food is welcomed." [source: http://www.beemaster.com/forum/index.php?topic=8374.0 http://www.beemaster.com/forum/index.php?topic=8374.0]
• marcusgarvey 11y ago
  How long will Uber's appeal take? What happens if they lose? Can other jurisdictions use this finding to change the way Uber operates?
• pbreit 11y ago
  I don't think this holds. Either Uber makes slight changes that comply, some other legal body re-evaluates or laws are changed slightly to accommodate. This is too powerful of a concept to dismantle so easily. Being able to pick and choose when you work and still be able to make decent earnings is very useful to society.
• dotBen 11y ago
  Just to point out -- the California Labor Commission’s ruling is non-binding and applies to a single driver, it's not a class-action or applies to anyone else. Reports of the demise of Uber due to 'all partner drivers now being employees' is grossly exaggerated. Uber is also appealing. [disclosure: I work for Uber] (see http://newsroom.uber.com/2015/06/clcstatement/ http://newsroom.uber.com/2015/06/clcstatement/)
• codecamper 11y ago
  I'm surprised that Uber discouraging their drivers to drive for other providers was not called out. From what I understand, if you are an Uber driver and you do not accept a call too many times, Uber will simply stop giving you ride requests. This effectively squashes a driver's desire to drive for other networks because if he/she is busy with another network's ride when an Uber request comes in, he cannot accept it. Do that that some unknown number of times, and you don't get more work from Uber.
• kposehn 11y ago
  From Uber: > Reuters’ original headline was not accurate. The California Labor Commission’s ruling is non-binding and applies to a single driver. Indeed it is contrary to a previous ruling by the same commission, which concluded in 2012 that the driver ‘performed services as an independent contractor, and not as a bona fide employee.’ Five other states have also come to the same conclusion. It’s important to remember that the number one reason drivers choose to use Uber is because they have complete flexibility and control. The majority of them can and do choose to earn their living from multiple sources, including other ride sharing companies.
• jacquesm 11y ago
  This is going to put a knife into a lot of 'modern' start-ups. The theme where the company sets the prices, controls the payments and so on and where the people doing the work are contractors without employee protection or benefits applies to many of the business models of the new middle men.
• gmisra 11y ago
  The right answer is that the "on demand economy" does not fit into existing labor structures, and trying to shoehorn these new jobs into current legal frameworks is probably doomed to confusion. This is especially complicated because, in the United States, too much of the social safety net is explicitly tied to employer-employee relationships (workers comp, unemployment, healthcare, etc). What I want is confidence that somebody providing a service to me is provided these benefits - if you work 40 hours/week in "on demand" jobs, you should receive commensurate coverage from the safety net, and you should receive at least the mandated minimum wage. If you work 10 hours in a week, you should receive the pro-rated equivalents of those services. This is, of course, complicated - how do you account for people working two services at the same time, or the "uber on the couch" issue, or who pays for vehicles and other capital goods. But pretending that existing labor laws will cover the changing workforce is silly. We hear all the time about how the nature of work, especially service work is changing. It seems like a logical consequence that the nature of how society classifies, supports, and regulates work should also change. Uber, et al, and their VC comrades have a huge opportunity to shape the future of how people work, and how the social safety net works - to effect real disruption. Based on their actions, however, it is hard to conclude that Uber, et al are actually interested in this discussion, beyond the marketing rhetoric it enables. As far as I can tell, they view the friction between existing laws and their business model as a profit opportunity and not a leadership opportunity. And so the inefficient behemoth of government regulation will inevitably step in.
  • TheOtherHobbes 11y ago
    >you should receive commensurate coverage from the safety net 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.
• astaroth360 11y ago
  Please, please let Uber get pwned in the face for their general combative business practices :D Seriously though, they give the "ride sharing" economy a bad name.
• pbreit 11y ago
  I tend to agree with Uber here: http://newsroom.uber.com/2015/06/clcstatement/ http://newsroom.uber.com/2015/06/clcstatement/ I don't think this ruling will have much of an impact on anything.
• deleted 11y ago
  [deleted]
• randomname2 11y ago
  HN mods: Techcrunch have retracted their original headline as this ruling only applied to a single driver, could we get the HN headline updated accordingly to "Uber Driver Deemed Employee By California Labor Commission"?
• sudioStudio64 11y ago
  The regulations on taxi drivers exist for a reason. Uber found a way to skirt some of those regulations for a time. Avoiding that regulation created a revenue stream that they used to operate and grow. It was always in danger of regulators catching up to them. If you read some of the driver's reports then it becomes hard to really buy their "big taxi" schtick. That being said, they obviously provided something that people want. Taxi companies will have to adjust to this. (In some places like SF they already are.) In the end, I think that Uber will go the way of Napster and the taxi companies will end up adopting their techniques the way that the big record companies did.
• gregoryw 11y ago
  Anyone who has hired contractors knows where the line is. The damning part is the drivers have Uber provided iPhones in their cars. You have to provide your own equipment to be a contractor.
• anigbrowl 11y ago
  One of the downsides of so many tech companies being privately held due to the unfashionability of IPOs (per the Andreessen Horowitz slide deck the other day) is that we lose out on the price signals that a stock market listing would normally provide in response to something like this.
• big_data 11y ago
  Better hurry up with that IPO ...
• jleyank 11y ago
  Stupid question, perhaps, but IANAL... How does the Uber situation differ from the contractor situation Microsoft dealt with 5-10 years ago? If there's not significant difference, isn't this all settled case law?
• paulsutter 11y ago
  If this sticks, it just means that Uber drivers will get paid less in cash, more in benefits, and lose the ability to take business tax deductions. Is that really better for the drivers? Sounds worse to me. I ask because many people have been claiming Uber is a bad actor for making drivers contractors, but it's not clear to me that it's a big win for the drivers to be classified as employees. Actually it seems worse in many ways.