In this week’s roundup, senior RSG contributor John Ince highlights an intriguing story about an Uber database hack, a cover up – and possible jail time for a former Chief Security Officer. Plus, the latest rideshare news including what the future of rideshare could look like and how the gig economy is due for a reckoning.
Why Uber’s business model is doomed [The Guardian]
Sum and Substance: Having threatened to pull out of California completely, Uber and Lyft recently won a temporary reprieve from orders to reclassify their drivers as employees rather than independent contractors. The companies argued they could not come up with a plan for doing so overnight, even though more than two years have passed since California’s supreme court ordered them to change their ways. The Californian labour law AB5 was supposed to end their non-compliance.
One might assume that misclassifying drivers as independent contractors enables rideshare companies such as Uber to make exorbitant profits. The reality is far weirder. In fact, Uber and Lyft are not making any profits at all. On the contrary, the companies have been haemorrhaging cash for years, undercharging users for rides in a bid to aggressively expand their market shares worldwide.
My Take: The article clearly has a point of view and it’s not supportive of Uber’s current business model. Personally, I agree with most of the articles main points – particularly about how Uber continues to be able to attract investors who don’t seem to care about profits. Sooner or later this will catch up with the company.
Former Uber Exec Blocked Information about Database Hack [TheDetroitBureau]
Sum and Substance: The U.S. Department of Justice has charged Uber’s former chief security officer with obstruction of justice for covering up a hack of the ride-hailing service’s computer system in 2016 and exposing the personal data of millions of users of the service and its drivers.
According to the complaint filed in federal court in San Francisco, between April 2015 and November 2017, Joseph Sullivan, 52, of Palo Alto, California, served as Uber’s Chief Security Officer.
My Take: Ghosts from Uber’s past keep appearing. In this case it’s a criminal complaint, which as I understand things, means there could be jail time.
Poll Finds Majority of Uber Drivers Support Independent Contractor Classification [AutoRentalNews]
Sum and Substance: While the survey found the majority of drivers wish to remain independent contractors, they also want benefits such as sick leave and health insurance. –
Uber drivers and likely voters overwhelming support Uber’s proposal to keep drivers as independent contractors while affording them some benefits and protections, according to a new survey.
My Take: Looking towards election day, all drivers eyes are on the outcome of Prop 22 in California. We don’t have many polls about the projected outcome, so this work stands out. Unfortunately, this is a study commissioned by Uber, so the results have to be taken with a grain of salt.
Learn more about Proposition 22, how it could impact AB5, and AB5’s impact on companies beyond rideshare here: Everything You Should Know About AB5.
Uber and Lyft Are Thinking About a Franchise Model. That Won’t Fix the Gig Economy’s Problems. [Slate]
Sum and Substance: … Last week Uber and Lyft threatened to shut down in California if they were forced to comply with a law that would require them to classify their freelance drivers as employees. An appeals court granted the companies a temporary reprieve on Thursday, allowing them to operate with independent contractors while they fight the court order. However, the companies are already preparing for the day of reckoning should they lose their legal battle and reportedly considering switching to a franchise model. Under the plan, the companies would license their brand names and technology to owners of traditional taxi fleets. The fleet owners would employ the drivers, allowing Uber and Lyft to continue to avoid the costs associated with employment.
My Take: This article goes to the heart of the problem: control without responsibility. Going to a franchise model won’t solve that problem. It will simply change the legal arrangements the company uses to avoid taking responsibility for their workers.
Read more about how the franchise model could work here: Uber and Lyft Looking Into Franchise-Like Model for California.
The future of Uber and Lyft in California: What you need to know [SFChronicle]
Sum and Substance: The day before, the companies won a last-minute reprieve from a preliminary injunction that would have forced them to turn drivers into employees on Friday. Had they not been granted that delay, Uber and Lyft had planned to shut down California rides then and to keep cars off the road until at least November, when voters weigh in on Proposition 22, their ballot initiative to keep their workers as independent contractors.
My Take: This is a good summary of where Uber and Lyft stand in California with respect to AB5 and Prop 22. If you know what’s going on most of what’s in the article will be repetitive. If you don’t, well, it’s all here for you.
Readers, what do you think of this week’s roundup?
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-John @ RSG