Even though this week’s big CLC ruling affected only one driver, I think it speaks volumes to the uncertainty around driver’s employment status. I know that a majority of drivers (including myself) don’t want to be employees of Uber but I can also recognize the fact that this IC model has benefited companies like Uber A LOT more than its drivers. I think what ultimately should happen is a mixing of the two so that drivers can retain some of the flexibility they value but aren’t forced to bear a majority of the risk and exposure. Uber likely won’t push for that so who knows how long it could take to get this all resolved.
In the mean time, all we can do is sit back and read all of the news surrounding the story. Today, RSG contributor, John Ince, takes a look at exactly what this ruling entailed and breaks down some of the week’s other top stories.
If you’d like to read more about my thoughts on this week’s main topic, head over to Forbes and read: Do Uber Drivers Even Want To Be Employees?
California Labor Commission rules an Uber driver is an employee, which could clobber the $50 billion company
Sum and Substance: The California labor commission has ruled that an Uber driver is an employee, not a contractor, Reuters reports. The decision was made after a San Francisco driver, Barbara Ann Berwick, filed a claim against the company. The commission sided with her largely because it deemed Uber was “involved in every aspect of the operation.” It’s potentially a huge blow to Uber’s business model, at least in California. There’s currently a class action suit going on in which drivers are suing Uber (and competitor Lyft) trying to get classified as employees rather than contractors. Today’s decision is not part of that suit, but could help set legal precedent for it. Uber is appealing the board’s ruling.
My Take: This is a major development. It’s potentially a crippling blow to both Uber and Lyft. Investors surely are taking note of this and it will likely affect the valuations of the company in any future financing rounds. We can expect Uber and Lyft to fight this battle tooth and nail, but this precedent along with the FedEx ruling a few years ago and the recent settlement (See below) raises the real possibility that the rideshare companies’ business model isn’t going to fly in the face of legal precedent.
The numbers in this ruling are miniscule. The plaintive, was awarded a measly $4,152 bucks in reimbursement for driving just a few months in 2014. But multiply that settlement by the 50,000+ Uber drivers in California many of whom drive year round and you’ve subtracted hundreds of millions of dollars from Uber’s bottom line – every year. Potentially the most damaging aspect of an adverse ruling from the company’s standpoint is opening up the legal path to drivers union’s. If that happens then suddenly neither Uber nor Lyft can unilaterally decide what commissions they will be taking from the driver’s fares. It would become a matter of collective bargaining which changes the whole game. Stay tuned. This game has just become very interesting. [Read more…]