Virus Continues to Hammer Uber, Lyft and the Unemployed

In this week’s roundup, senior RSG contributor John Ince covers how the coronavirus continues to hammer gig companies like Uber and Lyft, and how mismanagement has led to mass confusion among drivers and other independent contractors, hoping to get unemployment relief.

‘Scared to Death’ by Arbitration: Companies Drowning in Their Own System [NYTimes]

Sum and substance: Over the past few years, the nation’s largest telecom companies, like Comcast and AT&T, have had a combined 330 million customers. Yet annually an average of just 30 people took the companies to arbitration, the forum where millions of Americans are forced to hash out legal disputes with corporations.

Mr. Lidow, a Silicon Valley entrepreneur with a law degree, figured there had to be more people upset with their cable companies. He was right. Within a few months, Mr. Lidow found more than 1,000 people interested in filing arbitration claims against the industry.

Editor’s Note: A wild story about how gig economy companies, like DoorDash and others, are dreading the sea of arbitration lawsuits headed their way. Ironic because those companies forced arbitration on independent contractors – but ICs found a way around them.

If you’re interested in pursuing suing a gig economy company, read our story about the process below and check out the law firm we recommend, Potter Handy LLP, here.

Related: 600,000 Reasons Why I’m Suing Uber and Lyft

Uber: Virus Could Push Cash Bleed Over The Edge  [Seeking Alpha]

Sum and Substance: Uber’s operating income excluding one-time gains has been negative since its inception.

Profitability was not improving prior to the global COVID-19 outbreak and is now likely to worsen.

Uber Eats has been losing money on every delivery. Restaurants are now closing due to the virus and demand may not increase as much as hoped.

Rides have seen a significant impact from the virus with bookings not expected to begin improving until at least Q3.

Uber has been burning through cash and will begin to face liquidity issues as early as 2021.

My Take:  A few weeks ago, Uber’s CEO Dara Khosrowshahi told investors that they’ve got $10 billion in cash plus another 2 billion in revolving credit.  The news sent Uber’s stock up almost 25%.

Well, this article takes Uber’s $10 billion and explains how quickly that money could go up in the wind.  Given that Uber was losing almost a billion a quarter before the virus, it sounds plausible, but what do I know.  In any event, the article is well worth a read.

Uber, Lyft Drivers Eligible for Jobless Aid Under New Law  [Bloomberg]

Sum and Substance:  DOL guidance adds new category of unemployment insurance eligibility Some advocates say DOL missed opportunity to cover more workers

Drivers for ride-sharing services like Uber and Lyft can qualify for emergency unemployment insurance if the Covid-19 pandemic forces them off the road, the Labor Department said.

My Take:  There’s been a lot of confusion around the implementation of CARES, and this provides a bit more clarity … but it still doesn’t put money in drivers pockets.

Related: 6 Ways Uber and Lyft Drivers Can Get Free Money Right Now

Uber and Lyft Drivers Face Hurdles to Stimulus Bill Benefits  [NYTimes]

Sum and Substance:  Gig workers seemingly eligible for unemployment pay because of the pandemic have met roadblocks to filing. Some fault Labor Department rules.

Shortly after the Senate approved a huge stimulus bill in late March that made gig workers and other contractors eligible for unemployment assistance during the coronavirus pandemic, Uber’s chief executive, Dara Khosrowshahi, rejoiced on Twitter. “Thanks to the Senate for supporting 1.3M @Uber drivers & delivery people,” he wrote. “Many independent workers are on the frontlines; all deserve support.”

But a variety of obstacles — including the difficulty of bringing decades-old state unemployment systems up to speed and strict eligibility guidelines from the Labor Department — have left most drivers unable to take advantage so far.

My Take:  This is the reality of the implementation of CARES act – mass confusion.  Nobody yet knows what’s going to happen under the act.  A labyrinth of confliction state and federal laws stands in the way of drivers getting the cash that they want.

What Uber should do now [Quartz]

Sum and Substance:  … In a pre-pandemic world, a service that delivered anyone anything in five minutes (or, more realistically, half an hour) was a luxury. Now, with an unprecedented share of the global population on lockdown, it’s suddenly become a necessity.

The billions of people confined to their homes still need food, medicines, and household supplies, at a minimum. But once-routine trips to the store have become risky, especially for the elderly and people with underlying health conditions at higher risk of falling seriously ill from Covid-19. So long as social distancing measures remain in place, fewer people going to stores is also better for everyone.

This is where Uber can help.

My Take:  The logic of this article makes sense: Uber and Lyft should pivot during the pandemic to delivery of food, medicine etc.  But the logistics are challenging – especially during a time when everybody is trying to avoid the virus.

Uber And Profitability: A Deep-Dive Analysis  [Seeking Alpha]

Sum and Substance:  Uber claims it can become “profitable” yet a deep dive analysis shows this is a stretch as it relies on one Non-GAAP metric “adjusted Rides EBITDA”

Uber’s story changes frequently from the catalyst being autonomous vehicles, to Uber Eats, and now back to ride-sharing. I have been critical of Uber’s lack of product-market fit and subsidies since the company went public.

I remain bearish although eventually the stock will be so cheap and valued so low that the short potential may wane. …

My Take:  This is another very skeptical article.  It’s worth noting that the market is ignoring these articles.  Uber stock prices have risen for four days in a row.  So much for logic?

Uber wants to redefine employment. More than 50 labor groups are fighting back [LA Times]

Sum and Substance:  A coalition of about 50 labor groups is asking congressional leaders to reject Uber Chief Executive Dara Khosrowshahi’s proposal for a new legal category that would allow the company to keep treating its workers as independent contractors while affording them partial employee benefits.

In a letter sent Wednesday, the organizations — which include the National Employment Law Project, AFL-CIO, Legal Aid Society, Rideshare Drivers United and Gig Workers Rising — argue these workers have been misclassified as contractors and the resulting lack of benefits has left them “uniquely vulnerable” to the coronavirus pandemic. The groups accuse Uber of “exploiting the moment to further strip protections from those on the front lines of the crisis.”….

My Take:  This letter really goes to the heart of the matter: who pays for the unemployment insurance?  It was a national emergency and in an atmosphere of crisis, Congress said the Federal government would pick up the tab.  That’s fine, but labor groups don’t want that to define the debate.  They feel Uber should ultimately pick up the tab.

Uber to give drivers millions of face masks to battle coronavirus [Reuters]

Sum and substance: Uber Technologies Inc on Thursday said it plans to ship millions of face masks to its active drivers and food delivery people around the world to help prevent the spread of the novel coronavirus.

Editor’s Note: Better late than never, I guess, but it seems like these face masks (and other sanitizing equipment) could have come a lot sooner. How many people are still driving, just driving and not delivering, for Uber?

Readers, what do you think of this week’s roundup?

-John @ RSG