I don't really understand how a state law declaring something as so can have any relevant effect on federal determinations of employee/contractor status, which is far more dangerous to the TNCs business model. This mostly seems like feel-good legislation purchased by Uber to try to delay the inevitable, but the drivers are employees by any sort of logical duck test, and it's only a matter of time before the courts come to that conclusion too.
> the drivers are employees by any sort of logical duck test
I strongly disagree and think this is very open for debate. Drivers set their own hours and use their own equipment. They can even simultaneously use another app (ex. Lyft).
I really don't see how it constitutes an employment relationship. In fact, it seems to match all the typical characteristics of contractors.
The big example how the relationship is an employment one (IMO) is the integration test from US v. Silk (1947) -- and yes, it's from 1947 so take what you will from that but it is still one of the factors. Uber simply doesn't exist as a product without the drivers. The drivers' "businesses" are so integrated into Uber's product that there is no meaningful distinction that can be drawn there. Courts frown on rules lawyers, which is what Uber is trying to do right now.
There's another 19 prongs that have been used in the past to classify people who are employees as employees. I estimate Uber can only meet 7 or 8 of them, and I don't think that's enough to establish that the drivers are bona fide contractors.
Your example of United States v Silk[1] doesn't actually help your argument in relation to Uber drivers. Yes, the Supreme Court reclassified the "unloaders of coal using shovels" as "employees" but the majority opinion agreed with the lower court to leave the drivers as "contractors". Relevant excerpt of the decision:
"... But we agree with the decisions below in Silk and Greyvan that, where the arrangements leave the driver owners so much responsibility the investment and management as here, they must be held to be independent contractors.[14] These driver owners are small businessmen. They own their own trucks. ..."
Also, your comment about "The drivers' "businesses" are so integrated into Uber's product that there is no meaningful distinction that can be drawn there" is not a consistent litmus test since many industries depend on people "integrated" into their product. Movie productions hiring freelancers such as stuntmen, soundmen, actors, etc -- who are all "integral" to the product (the film). Or hair salons providing booths to freelance hairstylists. Those hair cutters are "integral" as well.
There are better arguments for reclassifying contractors as employees other than the "integral" test.
> ...These driver owners are small businessmen. They own their own trucks. ..."
The Uber case can be distinguished...Uber actually owns the vehicles many of the Uber Driver's operate. (If you are an Uber driver you can have Uber finance you a vehicle). Further, very likely the truck drivers actually own a business entity separate and apart from themselves, I don't think you will find many Uber drivers being paid in the name of a business (not determiniative but a factor in many states).
In other words, the Uber drivers ("contractors") don't own their own equipment ("the car") rather Uber's partners name is probably on the title.
While I don't know the answer, should the evidence come out, do you think Uber is making money from their partners financing the equipment to the Uber contractors?
Financing your car through the company that you work for as an independent contractor it not generally how car financing works.
"Tools and Materials: The furnishing of tools, materials, etc., by the employer indicates control over the worker."
I think that fact that in some instances the company finances the very tools required by the contractor to perform - for this factor - suggests employee, I imagine you still don't.
Luckily from the sidelines we can watch as the various levels of government (federal, state and local) begin to figure it out for all of us. Already California Labor Commissions have ruled an Uber driver as an employee (which Uber is appealing to the CA Courts, so now we will have our first taste of their opinion) and per this article some state legislatures appear to be codifying drivers for TNCs as ICs.
I think you're pretty far off on all of this. Most Uber drivers own their own cars. Uber doesn't do any of the leasing itself, instead sending drivers to 3rd party leasing companies. Uber gets either zero or very little kickbacks since Uber's primary motivation is getting drivers in nice cars on the road. The California decision was by some employment office with no real authority on the case of a single driver and so pretty much irrelevant.
>Uber doesn't do any of the leasing itself, instead sending drivers to 3rd party leasing companies
https://get.uber.com/cl/xchange/ or just Google it, Uber certainly did begin leasing cars. The lease payments go directly to Uber's subsidiary.
>Uber gets either zero or very little kickbacks since Uber's primary motivation is getting drivers in nice cars on the road.
These drivers, as independent contractors, are supposed to provide their own tools/materials to perform, not finance/lease/rent the tools from the company to perform.
>The California decision was by some employment office with no real authority on the case of a single driver and so pretty much irrelevant.
No real authority? I'm assuming you have never run your own company and had a former employee with a complaint with "some employment office".
They found the Uber driver improperly classified as an independent contractor, as a result Uber was ordered to pay the employee's driving expenses of $1,000's. If Uber loses its appeal in court all the sudden that single case becomes precedent for all California Uber drivers.
>https://get.uber.com/cl/xchange/ or just Google it, Uber certainly did begin leasing cars. The lease payments go directly to Uber's subsidiary.
Seems like this discusses "XCHANGE LEASING, LLC", not "Uber Technologies, Inc" or "Uber USA, LLC". I fail to see the relevance.
>These drivers, as independent contractors, are supposed to provide their own tools/materials to perform, not finance/lease/rent the tools from the company to perform.
I think the answer is most likely "no". And I'd be surprised if it even gets kickbacks from leasing companies since it is already getting nice cars on the road with motivated drivers who have to pay their leases off with earnings.
I agree that there certainly could be an argument towards classifying drivers as employees. The fact that the app would not function without drivers is definitely a meaningful one, though it also raises troubling questions over whether Ebay sellers (for example) should also be classified as employees.
Like you said, it's a multi-pronged and complicated test. I actually think Uber could meet a majority of the IRS factors.[1]
Namely:
1. Instructions: Uber does not instruct drivers about when, where, or how to drive.
2. Training: by most reports, Uber provides no training to drivers. (In fact, this is an argument which Uber detractors often use against it.)
3. Services Rendered Personally: as far as I know, Uber doesn't forbid you from hiring your friend to drive your car around with your Uber account open. (HIRING, SUPERVISING, AND PAYING ASSISTANTS might also apply here.)
4. Set Hours of Work: You can drive whenever you want.
5. Full Time Required: You can only drive a few hours a week.
6. Doing Work On Employer's Premise: This test is somewhat less applicable, but Uber doesn't require their drivers to (for example) come to a company HQ at the beginning of their shift.
7. Payment By Hour, Week, or Month: The bulk of driver payments depend on miles driven for customers, not hours "worked."
8. PAYMENT OF BUSINESS AND/OR TRAVELING EXPENSES: Uber does not compensate drivers for any of their (substantial) expenses.
9. FURNISHING OF TOOLS AND MATERIALS: Drivers provide all their own equipment.
10. SIGNIFICANT INVESTMENT: This is arguable, but many drivers are known to buy new cars just to drive for Uber.
11. REALIZATION OF PROFIT OR LOSS: This is definitely plausible. If drivers don't keep a firm grasp on their expenses or spend too much time driving around looking for riders, they can definitely suffer a loss.
12. WORKING FOR MORE THAN ONE FIRM AT A TIME: Uber drivers often simultaneously work for Lyft or other ridesharing services.
This isn't cut-and-dry and we shouldn't treat it as such.
1. Instructions: Uber instructs drivers on how to use the app to manage fares, and how to use the app to navigate routes. Generally, the use of other navigational apps was not permitted.
2. Training: Uber trains drivers in how to use their app.
3. Uber forbids drivers from having friends in the car and are expected to behave like livery drivers.
4. (Drivers can work whenever.)
5. (Drivers do not need to work full time.)
6. Drivers are required to display an Uber tag in their windshield while driving, (but are not required to begin and end their work "shifts" at any particular location).
7. Drivers are paid out of Uber's revenues, and not by the customer. This is obvious from the way that Uber prepares its financial statements, wherein all payments from customers are treated as its revenues, and driver's cuts as COGS. (On financial statements, employees are COGS, contractors are generally other expenses.)
8. (Uber does not compensate drivers for their expenses) except for tickets, impound fees, and fines incurred while driving for Uber.
9. Uber provides an app, a windshield decal, navigation services, payment processing services, and deposit services.
10. (Drivers provide their own cars.)
11. (Drivers can incur a loss looking around for riders.) This is actually a big point at the international level when determining whether one company is independent of the other financially, but it generally isn't as much of a factor at other levels.
12. (Drivers work for multiple services.)
The balance favors treating drivers as employees. Indeed, one of the most important factors is that Uber itself characterizes the drivers' income as its own on its financials and tax returns. That will definitely hurt it when the IRS, the same agency that audits the tax returns, needs to make a determination about classifying the drivers.
#1 I see drivers use other nav apps all the time. Uber just provides integrated navigation, but I'm pretty sure it's not required. The uber app didn't have navigation for quite a while actually.
#6 is calfornia regulation, not an uber/lyft/whoever requirement. I don't know how it's like elsewhere.
#9 I would compare uber to current taxi independent contractors, which have been standard operating procedure for decades. The taxi driver rents a taxi car with it's attached taxi medallion for a few hundred dollars a day. Anything they make after that is their money. But since the fee is usually very high, they have to work 12 hours day to make something approaching a living. I'm fairly certain the card terminals and the taxi company phone dispatch services come with that rental.
I feel like you completely missed the point of #3. Does Uber forbid drivers from subcontracting? There'd still be one driver in the car, it just wouldn't be the Uber account holder.
> 1. Instructions: Uber does not instruct drivers about ... how to drive
Whatever gave you that impression? Uber has strict rules about how drivers should behave with customers, or about the maintenance of their car. For example drivers are not allowed to be aggressive in traffic (like taxi drivers), they are not allowed to talk with the client unless the client shows interest in talking, they can't smoke in their car and they are not allowed to reject orders, otherwise they'll suffer a pay cut.
I've talked with multiple drivers that confirmed the above. I also once complained to Uber about a driver that called me to convince me to cancel my order and they replied that the driver was scolded. I have the response in my email to prove it.
As a disclaimer, I'm talking about Uber from Romania, not from the US, but it's the same story, drivers being hired as contractors.
There's a distinct difference between those "marketplaces" and Uber, and that's that Uber sets the price, not the member. When I Ebay something, I set the price. If I request a HIT on MTurk, I set the price. If I put up a room on Airbnb, I set the price. If I hop in my car and turn on Uber, I don't set the price. Uber does. I would think that setting my own price is a significant test for being a "marketplace".
Also, allowing customers to choose who to go with.
Uber doesn't allow customers to choose a driver; the system assigns one to you. On the other hand, an eBay customer bids on whatever auctions they want to bid on, and they know the seller's identity beforehand.
With eBay, you can go "I had a bad experience with this guy before, so I'll look and see if anyone else is selling this item so I don't have to deal with this person again". With Uber/Lyft, you're stuck with "ugh, the system matched me with this guy, guess I'm going to have to constantly cancel and re-request until I'm matched with someone else" (for the record, I've only had to do this twice in the almost two years I've been using Lyft).
Uber drivers are way more cogs then Ebay sellers. They are representing Uber so they are instructed to offer water to the client, say "how are you today sir", etc.
Personally I'm not sure, because it seems like both of you are right. Perhaps it is that lawyers are there to find loopholes but present them as if they aren't.
Last month I heard a McD employee tell me: "Ohh haha, I'm not an all-out McD employee. I'm in just for the spare cash". The same employee also worked in Dairy Queen across the block.
I hire PCB layout contractors. If I call with a layout job, and they decline due to being busy on other jobs, I eventually quit calling them. You could say I "blackballed" them, but really I'm just logically calling those who I have reason to believe will get the job done on my time frame.
Why is it OK for me to do this to a contractor, but not for Uber to?
Because you don't call them out for 30 minutes of work, put them on a 10 minute break, give them another 10 minutes of work, put them on a 13 minute break... And only expect to pay them for two thirds of the time they worked.
You also don't have an automated system that broadcasts identical job offer to contractors, and is able to select whichever one answers first.
I'm sure the McDonald's manager would love to only pay his employees for the thirty second increments where there are customers in the restaurant... But I'm assuming you don't do that!
Yea, you use your own equipment. The equipment is a 2008, or newer four door vechicle. It can't be a salvaged title. I don't care how well the repairs are carried out. Uber even has the tenacity to list what vechicles are appropriate to drive. A list I can't figure out? Are they going for safety? Or, is it aesthetics?
There's a lot of people who are desperate for extra income--short of ditch digging. I looked into driving for Uber a year ago. While I haven't bought the four door sedan, it's still on the back of my mind.
My biggest fear is spending eight grand on a Uber approved vechicle, and it not working out, and I'm stuck with a boat anchor--that's depreciating daily. Four door vechicles are a hard sell. Wether new, used, or a classic vechicle--
a two door almost always sells faster than a four door. (I'll pass this along, if you want a classic car--and don't care about resale value, look for four door vechicles. Car guys just don't want them. They are a good value now.)
So, after looking into that list. A list that changes. I believe Uber is a employer. What really gets me about Uber is they use your insurance. You take on most of the risk, and they have the nerve to tell you what's aesthetically pleasing, or safe.
> I strongly disagree and think this is very open for debate. Drivers set their own hours and use their own equipment. They can even simultaneously use another app (ex. Lyft).
> I really don't see how it constitutes an employment relationship. In fact, it seems to match all the typical characteristics of contractors.
> The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.
> You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.
It's pretty clear that Uber is controlling the details.
Drivers can switch on and switch off whenever they want. Drivers must actively accept a ride. The passenger controls the destination and route, and provides managerial feedback (ratings).
> Although classified as independent contractors, Uber drivers are employees. They are required to follow a litany of detailed requirements imposed on them by Uber and they are graded, and are subject to termination, based on their failure to adhere to these requirements (such as rules regarding their conduct with customers, the cleanliness of their vehicles, their timeliness in picking up customers and taking them to their destination, what they are allowed to say to customers, etc.)
Additionally, one of the details Uber controls is that Uber drivers cannot drive older cars (https://www.uber.com/driver-jobs) - Car requirements are a year "2000 or newer (2005 in some cities)".
> If I'm hiring contract models for a fashion shoot, I can dictate their aesthetics. Likewise, Uber can require its contractors to use equipment which meets a certain aesthetic standard.
> It's perfectly okay for the hiring firm to give you detailed guidelines or specifications for the results it expects from you. But how you go about achieving those results should be entirely up to you.
So a clean car, being on time for a pick-up, or what to say probably fit into specifications for the results Uber expects, however how the drivers go about achieving those results should be entirely up to the contractor. But the model year of the car crosses that line. It tells the driver how the job is to be done - with a car newer than 2000 (or 2005 in some cities).
Uber is most likely making this requirement to lower the probability of break-downs during the drive. So there's logic behind their reasoning, but their requirement also limits the independent contractor in a way that a company would limit their employee.
> It's pretty clear that Uber is controlling the details.
Is it? Uber is actually quite hands off. In fact, you spend most of your time as an Uber driver without anyone monitoring you.
Uber is paying you to transport an individual from point A to point B in an expedient and safe way. They're not paying you for your time and they're not micromanaging your driving.
Or Uber wants to provide a reliable ride to riders, and they have to make certain assumptions in their dispatching algorithms in order to do that. Or they want to make sure that anyone can get a ride in any neighborhood in a city and drivers aren't discriminating for pickups (which is why they're often much more reliable than taxis).
Or Uber wants to employ contractors, only pay them for the minutes of the hour that their labour is required, and forbid them from moonlightning.
This is not so dissimilar from the McDonalds manager that gives his employees an unpaid two-hour break in the middle of their shift, but fires them if they leave the franchise during it.
If you want people to be available for a period of time, pay them by the hour.
If you want to only pay people when they are working for you, don't call them a contractor, but prevent them from moonlighting.
If you don't ack enough Uber rides, they will fire you. The drivers are exactly in the McDonalds situation described above - for practical intents and purposes, they can't leave the shop, but they are also not being paid to stay there.
There is only one reason for this policy - discouraging moonlighting.
>Drivers set their own hours and use their own equipment
Not exactly...
1. Uber actively solicits drivers to work certain hours and pays bonuses/hourly salaries to do so.
2. Uber, at least historically, has solicited drivers to travel outside their county (where ride sharing may legal) to drive in other counties (where ride sharing is illegal) by paying bonuses/hour salaries.
3. Skip the car for a second...all other equipment to facilitate the ride is provided by Uber, including: an iphone provided by Uber; the software scheduling the ride; the software routing the ride; and the software facilitating the payment process.
4. It is my understanding Uber will finance vehicles for Uber drivers, making Uber the owner of the cars being used by Uber drivers in many cases.
5. Where ride sharing violates the law, ranging from traffic tickets to criminal arrests, Uber will pay for the Uber driver's lawyer.
*I have always said 5 is the most disturbing, in what other industry does a company provide services (through employees or contractors) where the employee/contractor can be civilly fined and/or criminally charge for doing their job? From a legal perspective the courts, as far as I am aware, have never looked a company providing a lawyer as a factor in determining the employee/contractor relationship issue. However, that is only because I think the entire scheme is novel for any business, again what other industry see employees/contractors fined/arrested for doing their job? Ultimately the fact that Uber provides and pays for lawyers to represent Uber drivers will pop its head up in the courts, and it would not surprise me if this fact becomes a new element/factor the courts weight in determining the employee/contractor issue. In my opinion, such a scheme strongly suggests an employee relationship.
> 1. Uber actively solicits drivers to work certain hours and pays bonuses/hourly salaries to do so.
Do you mean surge pricing? Either way, this doesn't meet the bar of being an "employee." If you can work only 4 hours a week, then you are setting your own hours.
> 2. Uber, at least historically, has solicited drivers to travel outside their county
Define solicited. The law allows a company to encourage contractors to do certain things, but if it's not mandated then it's not instructions.
> all other equipment to facilitate the ride is provided by Uber
Uber does not always (or even usually) supply the iPhone. In fact, drivers have to pay Uber to rent an iPhone if they want it.[1] That's indicative of a contracting relationship.
The fact that Uber writes the software is immaterial: Uber is not contracting drivers to provide a ride-sharing service, it's contracting them to drive from point A to point B. The fact that Ebay provides the software for transacting on their marketplace doesn't make Ebay sellers employees.
> 4. It is my understanding Uber will finance vehicles for Uber drivers, making Uber the owner of the cars being used by Uber drivers in many cases.
While Uber does sometimes offer financing, that does not imply Uber owns the car. More importantly, this has no bearing on the majority of drivers who are driving non-Uber-financed cars.
> 5. Where ride sharing violates the law, ranging from traffic tickets to criminal arrests, Uber will pay for the Uber driver's lawyer.
Like you said, there is not caselaw determining this. But I don't agree that it necessarily implies an employment relationship.
If I, as a freelance developer, built a casino site for a client and was later charged in the lawsuit resulting from the operation of an online gambling site I would expect the client to offer assistance with legal counsel.
Also, do you have evidence of Uber paying for representation when it comes to non-ride-sharing traffic tickets?
No, hourly wages. Along the lines of emails/notifications going out to drivers telling them if they drive in certain areas/times they will be paid an additional hourly rate. For example, in Florida they will recruit out of town drivers into different towns for eventsm such as Spring Break in Panama City where recruited drivers were arrested, and recruites drivers to do this by offering an hourly wage during these times.
>Uber does not always (or even usually) supply the iPhone.
I have had multiple drivers tell me otherwise. I don't know why they would make it up, but take note, amazingly all Uber drivers will have an iphone (figure ~50% would have an Android...but nope all iphones).
>While Uber does sometimes offer financing, that does not imply Uber owns the car. More importantly, this has no bearing on the majority of drivers who are driving non-Uber-financed cars.
Perhaps in your eyes, but the eyes of the law care who owns the equipment, and the law does not have to make broad decisions, they can look at each specific set of facts on a case by case basis.
>If I, as a freelance developer, built a casino site for a client and was later charged in the lawsuit resulting from the operation of an online gambling site I would expect the client to offer assistance with legal counsel.
That is a very odd expectation you have, especially if it is not explicitly in your Agreement, and I'd ask anyone to show me an IC Agreement where the company agrees to provide a lawyer for the contractor should the contractor's performance of the agreement violate the law (as such an Agreement would be unenforceable as you can not contract to break the law). Moreover, having drafted 100's of IC Agreements, I always include language to the complete opposite, to the effect that the contractor must warrant that their performance of the Agreement will comply with Federal, State and local laws and otherwise the contractor indemnify the company if they breach any laws.
>Also, do you have evidence of Uber paying for representation when it comes to non-ride-sharing traffic tickets?
I live in Miami/Fort Lauderdale, where Uber drivers are regularly ticketed and sometimes arrested. Its common knowledge around here Uber pays for the lawyer and pays fines. In fact Uber had an outstanding debt to Broward County alone for ~$3M.
>...it's a pretty novel interpretation that financing somehow transfers ownership.
Its not uncommon for lender to be on the title and hold title until the loan is paid then transfer it to you. Hence why if you default they can repo, because you are not the owner, otherwise it would be stealing.
>And where is there any evidence of Uber owning the equipment.
Some drivers claiming they paid for the Uber iPhone, some might have to put a deposit and others getting it free. FWIW every driver I have spoken to in person said they were given an iPhone for free.
As to the cars, I did originally understand Uber was acting as a Lender, it is anything but clear. Moreover, Uber has financing, leasing and rental programs. If you lease a car through the Uber program your payments go to Uber not the dealer or a lender. Eventually there will be a case where the discovery will answer the question if Uber ever found its way onto the title of any of the vehicles being driven by its drivers. Separately, they are currently being probed in CA for at least the leasing practice (not having to do with the IC issue).
> Drivers get punished if they don't work certain hours
Where is the evidence of that? I've ridden with plenty of Uber drivers who only drive a few hours a week.
> they don't get to set their own rates
This is far from being a dominant factor in employment status. If I offer a job for a fixed rate on Upwork and hire a contractor to do it, the fact that we didn't negotiate the rate doesn't make them an employee.
"Where is the evidence of that? I've ridden with plenty of Uber drivers who only drive a few hours a week."
If you turn down fares or only drive during certain peak times, you get pushed lower and lower into the queue when the robot decides who to send out on fares.
>This is far from being a dominant factor in employment status. If I offer a job for a fixed rate on Upwork and hire a contractor to do it, the fact that we didn't negotiate the rate doesn't make them an employee.
Except that the person on Upwork has the ability to negotiate, and choose not to take the gig. A driver for Uber does not get the chance to negotiate a fare with a customer and turn it down.
> A driver for Uber does not get the chance to negotiate a fare with a customer and turn it down.
The customer is not contracting with the driver, Uber is.
Uber offers a fixed rate. Take it or leave it (just like our hypothetical Upwork poster).
Negotiation has, as far as I know, never been included as a test of employment status. For one thing, it's a poor test: there are plenty of contractors who don't have the leverage to negotiate, and plenty of employees who do.
A good test - if the contracts are negotiated individually for all drivers - they are contractors. If it is take or leave with 1000s more like you - you are employee.
If you have no bargaining power - you are not a contractor IMO.
> A good test - if the contracts are negotiated individually for all drivers - they are contractors. If it is take or leave with 1000s more like you - you are employee.
I have literally never seen that as a test, and it seems extraordinarily effective.
Many employees have a ton of leverage and do negotiate their compensation aggressively.
On the other hand, many contractors do very little negotiation. Ex. my dad works in construction and would frequently be told about a certain project where the pay was $x/hr for 1 week — take it or leave it (no negotiation).
I don't see how whether contracts are collective or individual is at all an effective test for differentiating contractors and employees.
Huh? I can negotiate a salary, that doesn't make me a contractor. A separate haggling phase of a contract is not necessary for a contract to have legal force. It's the agreement to the letter of the contract.
Which has nothing to do with whether a driver is an employee or a contractor for uber...if a driver wants to go gypsy, they lose the dispatch functionality of uber, but gain the ability to negotiate fares with riders directly, as they are not encumbered by a previous agreement.
But what is the relevant "duck" here? What actual dynamic is the law trying to enforce? Any good law tries to align individual incentives with a social optimum, and I don't see how it's doing that here.
As best I can tell, employment law is trying to achieve the goal of "to the extent that you make a person economically dependent on you in the short term, you must provide that person some benefits that make up for that dependence". Hence why contractors get treated one way and employees another.
But then the law goes about it the wrong way by having a sharp discontinuity that encourages employers to make the relationship such that they get all of the advantages of such dependence, but stay just on the side of "you're still a contractor". For example, as it stands now, employers strengthen their case by making the worker bring their own tools.
A sane law would be more continuous: as you introduce more dependence of the worker on you, you most provide increasingly more benefits to cancel the problem that introduces. Though I admit that would involve a huge refactoring.
Trying to resolve whether someone "is" a contractor is (in the grander scheme) asking the wrong question, like debating whether alcoholism "is" a disease (cf Scott Alexander's "non central fallacy" or "worst argument in the world").
What if I don't want to be an employee? What if I like setting my own hours? Seems like there's a lack of empathy on some accounts to force everyone into one category.
I guess it is a question of power. An IT Contractor for example, may be tied to a specific client and the client may have strict requirement, but actually enjoy the same flexibility as the company as he can leave and reasonably assume he can be contracted somewhere else, or work on its own.
On the other hand, if McDo was to label all its employee contractor, most of them are tied to that specific employment and don't have actual flexibility.
I guess the contractor / employee law is meant to protect #2, but can catch #1 as a side effect.
So whenever you say "I don't want to be an employee" you most likely in position #1, while people in the other group simply would say "I can't be an employee".
That said, I have no idea what status Uber driver really should have. As taxi driver, I guess they have a variety of option for revenues and are only tied to Uber because Uber is a good source of work rather than being dominated by Uber ?
> I don't really understand how a state law declaring something as so can have any relevant effect on federal determinations of employee/contractor status
1) It causes the state tax boards to go along with it so Uber can focus its legal resources on when it gets dragged into Federal court.
2) If it becomes "usual and customary" in enough states a Republican congress might be willing to pass a bill to back it.
Yeah if you think of it from the perspective of the federal IRS I bet they are getting nervous about so much of the economy going freelance.As an employee Im a sitting duck for the tax man, as a contractor with my own business my income is far less preductabke however the IRS inevitably and legally gets a much smaller piece of my pie.
For the same job making the same income, you'll typically pay more taxes as a contractor than as an employee. You'll pay 100% of your SS/medicare taxes via the self-employment tax, where previously your employer was paying 50% of it for you. The income tax brackets are the same. You can deduct business expenses, but so could your employer, so the IRS isn't missing out on anything.
I think he's assuming the government will have a much harder time proving undeclared income. Probably not true in Uber's case, but contractors are pretty notorious for giving generous cash discounts.
I never understood why Uber didn't make all their employees (developers, marketing, sales) become contractors so they can save of all the additional costs.
Leading us back to the top-level comments to this thread. ("I don't really understand how a state law declaring something as so can have any relevant effect on federal determinations of employee/contractor status")
Bulk of whatever value exists. My point is that there probably will be no value for the investors to extract as none of the people who do the actual work would stand for such a structure for long. It would be trivial to introduce an organization that performs the same function, but which distributes all accumulated value to those performing the actions of the organization. Such an organization would have no use for investors who exist solely to take value out of the organization.
Similar schemes have been used in e.g. trucking for years; I am not sure what you think is the substantial difference between an Uber driver and a truck owner-operator, but it's far from obvious and very far from inevitable.
Drivers are like employees in someways and contractors in someways. We currently have square holes and round holes. Drivers are hexagons and don't match either.
Forcing them into either hole will have negative consequences.
As much as I can see the need for disruption in the taxi industry, I can't help but feel like we're going to relearn some lesson from a hundred years ago as to why the regulations formed in the first place.
Possibly. But it's good to check assumptions periodically, and I find the assumption that the taxi industry before uber was remotely efficient to be dubious. Very few industries merit protection from open competition (in fact, I can't think of one off the top of my head).
So far, as a consumer, I prefer uber (or lyft etc, experience is undifferentiated hence why I'm bearish on uber specifically) over literally every other transport-for-hire service I've ever used.
The contractor debate should be seen as a first step by the IRS (and soon enough, other countries' taxmen) to take more from an economy that is moving to being self employed at greater numbers (and in growing, valuable fields). Uber and everyone should fight this tooth and nail, both in courts and through lobbying. As it stands, there are strong legal arguments on both sides.
As to the ultimate fate of Uber: even if they win this, they will lose. Other competitors will steal their network effect and grow by competing on the spread between pay to company and pay to driver. In 6-10 years, self driving cars will replace human drivers, but margins will keep shrinking and competition will stay fierce. It will remain a huge industry in dollar terms, but not exceptional from a gross margin perspective.
I strongly disagree. Companies have abused contractor status for a long time. This is simply more of the same - another company wishing to have their cake and eat it too. It ultimately lets them pay at least some of their employees under minimum wage. Which puts more money in their pocketbook, and takes more money out of ours (the taxpayer's) through the form of extra government assistance.
People can choose where to work. If people thought that Uber didn't offer them a good deal for employment, they can just go work somewhere else.
All this does is force Uber to offer benefits which would only make them take a higher cut in the long run. Drivers will suffer in terms of their income. This entire thing is pretty dumb.
Adding to this, "the free market will decide" can sometimes be a cop-out, but in this case it applies perfectly.
There are reasonably low barriers to entry in this market, for the most part. If Uber treating its drivers as contractors rather than employees impacts Uber drivers in a negative enough way that they would prefer to work elsewhere, there is likely ample space for a competitor which offers a better deal for its drivers.
Drivers have little-to-no incentive to stay with Uber if they can get a better deal elsewhere (based on what I've seen, many already also work for Lyft), and users have little-to-no reason to stick with one on-demand ride app if there's another app that has more availability/drivers.
If cost-of-ride is the biggest competitive differentiator, the price of the ride will stay the same and drivers will be able to choose whether they want to work for a company which treats them as an employee but takes a bigger cut, or a company which takes a smaller cut but treats them as a contractor.
> As to the ultimate fate of Uber: even if they win this, they will lose. Other competitors will steal their network effect and grow by competing on the spread between pay to company and pay to driver. In 6-10 years, self driving cars will replace human drivers, but margins will keep shrinking and competition will stay fierce. It will remain a huge industry in dollar terms, but not exceptional from a gross margin perspective.
If this is the case, there is some justice in the world.
Not really, Uber is using their growth and capital to finance R&D of self-driving cars. They are actively hoping that in 6-10 years they won't have any human drivers.
Which gives them what? A monopoly on self driving passenger transport? I find it unlikely (and without that, they will deal with relentless competition).
Or maybe we'll learn that governmental regulation isn't the only form of regulation.
Uber is better than yellow taxis by a wide margin because of market regulatory forces (reputation, repeat business, competitors, etc.) which are far stronger than governmental regulations. By shielding yellow taxis from competition (remember what these taxis were like 10 years ago?), the government actually harmed consumers and subjected yellow taxis to less effective regulatory standards.
The claim that the market forces are more effective are plain wrong.
Because uber is not operating in a free market. Uber actively destroys competition to gain a new monopoly.
We’ll be exchanging one monopoly with another.
How well monopolies work can be seen with Comcast, etc.
In other markets, where sometimes yellow cabs have been governmentally regulated, but in better ways (for example, anyone can drive a cab if they have insurance + drivers license, but only N cabs can use the cab parking), uber is not an improvement, but actually making the market worse, because they reduce competition.
Your argument is like saying "Instead of Comcast, ATT, etc we should all use Google Fiber". Great, replace one monopoly with another, and for some people – take Romanian cities, which have better internet than Google Fiber – the new monopoly would be worse.
We need an open market, not another monopoly.
And we need safe, competition-friendly regulation by the government, not private regulation, not governmentally-enforced monopolies.
In my opinion, any regulatory scheme which starts with "anyone can drive a cab if they have insurance + driver's license" is going to be worse than Uber.
One of the major advantages of Uber is the rating system. A bad Uber driver typically won't last long in the job. There isn't much that will get a bad taxi driver to stop driving. Eventually complaints might filter up to their boss or regulators, but it's a much weaker mechanism.
I think the existing regulations were mostly put in place to compensate for information asymmetry. People get into a taxi unfamiliar with the driver, the car, reasonable costs, and the area. To ensure a minimum level of competence, drivers are regulated. To ensure people don't get ripped off, fares are regulated. To ensure people don't get driven on artificially expensive routes... well, that doesn't seem to have been regulated very well.
Smartphones solve this better, though. Rather than some broad regulatory regime to ensure minimum competence from a random unknown driver, you can use an app to find out about your specific driver. To ensure you don't get ripped off, you can use an app to get a fare estimate to your destination before you book. To ensure you don't get driven on artificially expensive routes, you can just compare the route you take with the route your phone thinks you should take.
I wholeheartedly agree that we need an open market, not just another monopoly. But in doing so, we should take the lessons from Uber, not just the lessons from the past. The present looks a lot different. Any system which looks like traditional taxis and doesn't take advantage of the easy flow of information is going to be inferior.
Why do you suppose Uber created a reputation system and vets their drivers? They certainly weren't required to, but they profit from reducing asymmetry because consumers want to know their ride will be a pleasant experience.
Mandating the features Uber voluntarily chose to add will only hold future competitors back when some new type of technology moves beyond our existing capabilities. And good luck removing those regulations once those are in place. You'll have powerful companies like Uber fighting tooth and nail to keep competitors out of the market.
I never said Uber was operating in free market or that they wouldn't turn around and become rent seekers themselves (as they already have), but the reality is, Uber is subject to more market forces than yellow taxis were/are. Those market forces--not government forces--are what has enabled companies like Uber to improve on the status quo and deliver more value to consumers.
Also, how do you suppose Uber would become predacious monopoly? Certainly not by being subject to the relentless competition of new market entrants seeking to take their customers on a daily basis. Predacious monopolies (e.g., cable companies) exist in markets where they are heavily shielded from competition. When competitors arrive, their behavior changes.
> Also, how do you suppose Uber would become predacious monopoly?
In a way Google has de-facto search engine monopoly - by offering the best service that's hard to replicate because of scale effects, and by being a globally recognizable brand. Add to that Uber's eagerness to actively sabotage competition by means literally taken out of spy movies (burner phones and CCs, really?), and I can see them holding a monopoly for a while once they get it.
(And "for a while" is enough; Uber is perfectly aware that self-driving cars are coming, and is in fact preparing for it.)
I said predacious monopoly. There is an important distinction between a company with monopoly status because they provide the highest value among options freely chosen by consumers and a company with monopoly status because they are benefactors of anti-competitive governmental policies.
Google is dominant in US search, but they aren't really a monopoly. They have formidable competitors who hold nearly 1/3 of the US market. Of Google's service got really bad,I can switch my default search engine to a respectable competitor in a matter of seconds.
I certainly wasn't implying that Uber doesn't benefit from network effects and can't establish long-term dominance like Google, but if they are solely a consumer chosen "monopoly", there really isn't anything to fear. The concern is that Uber will do as taxi companies did before them and lobby for anti-competitive regulatory favors. I expect this will be the case, but this predacious form of monopoly cannot be achieved without the help of governmental regulation.
How do you regulate Uber to not take the mindshare of ride sharing services so it doesn't become a monopoly?
The problem with Uber, and Facebook, and Twitter, etc is that to have competition you need users, and to have users you need mindshare, and whoever is on top always has the mindshare.
Its also a modern phenomenon. You could Xerox it while competing copiers could effectively compete in the market by making a better product for value and getting fewer sales as a result of less marketing and brand recognition than what Xerox had, whose customers than pay an advertising and brand premium. Same with kleenex, or even search. The dominance of a competitor does not impair the competitions ability to compete unless those competitors use force of law to break a free market.
With Uber and Lyft, the more dominant Uber is, the less likely Lyft can get drivers and thus the less likely Lyft can get customers because Uber has all the customers and drivers. Its the same problem you have with operating systems, where you need the software users want, but the software also needs users to justify the investment, which is how Microsoft can continue to dominate with a demonstrably inferior product.
I'd love for there to be a way to break up mindshare monopolies, but destroying Uber through tax regulation and killing an entire fledgling industry is anything but a solution.
> Or maybe we'll learn that governmental regulation isn't the only form of regulation.
It is so by definition.
>(reputation, repeat business, competitors, etc.)
Those are not regulatory mechanisms. Those are mechanisms that enhance competition. Competitive markets usually need less regulation.
But none of those things you mentioned is going to get Uber drivers to buy the insurance they need to be covered against any harm they could possibly inflict on the people they are ferrying around.
What will happen is that eventually some gruesome accident will lead to a high profile court case and then finally governments will decide that yes, Uber drivers need to buy commercial insurance.
> What will happen is that eventually some gruesome accident will lead to a high profile court case and then finally governments will decide that yes, Uber drivers need to buy commercial insurance.
I don't understand where this misconception keeps coming from. Uber holds commercial insurance specifically covering passengers being ferried around by their UberX contractors.
Based on what definition? It's only common convention that has associated regulation with government action.
Competition is a regulating force. It's a force outside of oneself that governs and influences how they behave. I would love to charge excessive prices and line my own pockets with profits, but I do not. Why not? Excessive prices are consistent with what I want, but my customers will leave and I'll wind up with no profit, so I govern my behavior accordingly.
Based on the definition of the word "regulations". Not "regulating force", "regulations", as in a government telling you what you can or cannot do.
But anyway; competition on the market is a very powerful regulating force. It happily regulates pain, death and suffering into the work. I'm less worried about us having to re-learn the reasons for taxi laws, per 'panzagl. I'm worried that, as evidenced by people saying things like you did, that we'll have to re-learn the lessons of the Industrial Revolution. There is a reason we regulate markets, why we have employment and safety laws. Our forefathers paid in blood and tears to bring them into existence, so that most of us can enjoy working in safe environment and reasonable hours. The default, if you let competition have its way unchecked, is sweatshops.
The sweatshops claim is ridiculous. Tough industrial working conditions are needed to grow into a developed country, but it's misguided to attribute the improvements in working condition to regulations. Regulations tend to lag industry developments. Once companies like Wal-Mart are near paying their employees $10/hr (or can reasonably do so on a profitable basis), then they step in and lobby for an increase to the minimum wage. This works out nice because it (a) doesn't impact the companies already complying with proposed regulations and (b) it can be devastating to competitors who aren't. It's a one-two punch that advances the interests of particular companies and is easily mistaken by the general public as social progress.
It took Uber 2 years to acknowledge the fact that, yes, you need insurance when you drive a car commercially.
It will take another few until they’ll acknowledge that their drivers are employees, not contractors, and can demand medical insurance, retirement funds, etc.
All these things used to be provided thanks to regulation, and we’re seeing now how removing the regulation leads to uninsured cars on the roads driven by people earning below minimum wage without any social security.
I agree that Uber is flouting some reasonable, still-relevant regulations[1]. However, the insistence on "Uber needs to provide medical insurance, retirement funds, etc" is ... well, it comes off as a bit quixotic. If you did "lay down the law" one day, does that mean workers magically have all kinds of freebies?
No, it would be paid for out of the same revenues that Ubers drivers are currently being paid with. Instead of "$1/mile", it'll be "$0.30/mile, minimum mile requirement, and you get health insurance". Out of one pocket, into the other.
[1] "If someone is driving for your service, you must verify, not just trust, that they're insured, whether or not you provide that insurance yourself."
Well, how does it work for taxi drivers employed at taxi companies in Germany then?
Mandatory minimum wage, mandatory health insurance, mandatory retirement funds, mandatory unemployment insurance, etc.
Yes, in the end they usually get nothing for doing extra work (just their wage, plus 0€/mile), but that’s most definitely better:
The risk is gone – you don’t have to worry about medical stuff, or anything anymore, even as McDonalds fastfood drone you still have insurance, etc guaranteed.
I get the benefits of having benefits. But even in Germany, independent contractors are "a thing", and there are at least some workers who don't have their employer/main client directly paying for their benefits. And for (at least some of) those cases, we can recognize that it's pointless to make that main client pay for their benefits. Some workers believe they are better of by having contractor status and buying their own benefits, and you would need to find a compelling reason not to let this happen; that's why I'm asking for the logic behind the mandate against it.
When you think someone is flouting a reasonable law, that should directly translate into "here's a collective action problem whose solution they're disrupting".
"X should not be allowed to pollute at Y levels." -> "There is a collective action problem of preventing damage to the environment, which requires that everyone pollute less than Y, even though people privately benefit from doing more."
"Hans should not be allowed to pickpocket the wallets of passersby." -> "There is a collective action problem of ensuring stable property rights, which requires that people respect others' possessions, even though they privately benefit from stealing."
"Uber should buy health insurance for drivers." -> "There is a collective action problem of ????, which requires that Uber buy health insurance for drivers, even though they privately benefit from paying them cash instead."
Note 1: your answer to ???? must not be so broad that it proves you should buy health insurance for every person you buy a service from, including e.g. the independent courier that delivered your package.
Note 2: I made an honest attempt to unravel the logic of "what is the law accomplishing with the employer/contractor boundary", in an attempt to answer that question, in this post here: https://news.ycombinator.com/item?id=10717768
If you have a better answer, I'm very interested in learning from it.
Well, the German society has decided that yes, you should buy health insurance for every person you buy a service from, including the courier.
The result is subsidized healthcare via a complicated and weird system.
In fact, in Germany the employee always pays the healthcare insurance themselves as solution, but the government subsidizes it.
Sometimes the situation is that, yes, everyone should have something, so the employee/contractor divide makes no sense.
In the Uber/Lyft situation, the drivers should have health insurance through the government, and the car should be insured during the ride or between the rides by the companies.
The issue was about whether you should have to directly buy that courier's health insurance, and German law (as you note) obviates that question. (Though it didn't help to blur the difference between directly buying the courier's insurance vs indirectly via taxes, which was the core distinction the discussion was making.)
So I don't know why you (earlier upthread) thought that the German practice provided any insight into how to resolve the issue, given that US forces some purchasers ("employers") but not others ("customer") to provide certain benefits.
The German model does, however, provide a clean way to "cut" this "Gordian knot".
I get the feeling from Hacker News that in bigger cities there are far, far more people doing Uber full-time-ish than in smaller, population-1-million cities. For those doing it 40 hours a week as their livelihood, I can understand the call for more regulation, etc.
However, by far most of the folks I know doing Uber or Lyft are a lot closer to a contractor in definition.
* They use their own car they've already had before Uber (I.e., they didn't buy it just for Uber as some Uber forum posts talk about)
* They do it part time
* Most are doing it for "something new," when I ask them about it. For example I knew one driver who in her fifties just tried it to be out of the house more.
> * They use their own car they've already had before Uber (I.e., they didn't buy it just for Uber as some Uber forum posts talk about)
Interestingly, buying a car specifically to drive for ridesharing apps would actually be a point in favor of them being a contractor (they're making an investment in their "business")
Great powers are rattling sabers, electric cars are in their infancy, Russia and France are allies, Turkey is sliding into civil war, Japan is on the road of re militarization ...
There was a good reason those regulations we created left an exception for contractors and those reasons very much apply to Uber. If some driver is taking hails from both Lyft and Uber should both Lyft and Uber have to provide him or her with health insurance? It is often the case that employees are listed as contractors when they shouldn't be but Uber's drivers are very much not an example of this.
Except they very much are. Uber drivers get punished if they refuse too many fares, which means they do not get to choose what they work on, and they do not get to negotiate their own prices.
Since the article chose to not cover this important detail about the 5 states in question, allow me: all five have Republican governors and extremely large Republican majorities in the state legislature. To not cover this detail is to gloss over the real story here. To wit:
Ohio: Republican governor, Republican state House (65-34), Republican state Senate (23-10).
Florida: Republican governor, Republican state House (81-39), Republican state Senate (26-14).
North Carolina: Republican governor, Republican state House (74-45), Republican state Senate (34-16).
Arkansas: Republican governor, Republican state House (64-35), Republican state Senate (24-11).
Indiana: Republican governor, Republican state House (71-29), Republican state senate (40-10).
Of course, this would be much less of an issue if we had a guaranteed income, or even a lesser version of it for being between jobs; something like unemployment insurance, but only for people in this new category (which would have much less stringent requirements.) A universal health care system would also lessen their burden; ACA / Freelancer Union rates are still bananas expensive.
If we accepted that modern workers that flit from job to job and project to project are here to stay and gave them a real safety net without all the nasty ideological baggage, we could come closer to achieving the dream of the fluid, frictionless, task-oriented labor force that some economists have thought we should have for decades. Instead we have the Precariat.
> If we accepted that modern workers that flit from job to job and project to project are here to stay and gave them a real safety net without all the nasty ideological baggage, we could come closer to achieving the dream of the fluid, frictionless, task-oriented labor force that some economists have thought we should have for decades. Instead we have the Precariat.'
In many cases, a student's chosen major dictates their career options for the rest of their employed lives. The costs of switching knowledge-based jobs is hurting job market responsiveness and driving social inequality.
Fundamentally, the model of "learn as a kid - do as an adult" is obsolete. The world is far too complicated and moving far too fast. We need to strip down basic childhood education and publicly support adults learning throughout life. It doesn't have to be easy... it will still take years to switch domains. But that's a lag of 1-2 years for adults to retrain vs encouraging a new generation in highschool and waiting for them to pass through college.
I think it's interesting watching Uber become politically savvy. When the company started, it simply ignored regulations that weren't convenient. Now they seem to lean on lobbying, as well as campaigns to drive the public to contact local politicians. But that only works because they're large enough now.
If I remember correctly, wasn't one of the main reasons they weren't considered contractors is because they don't set their rates? How would this affect other industries... Like the tech industry... I mean I guess the contractor can always just say no if they don't like the rate being set.
It is weird to see that despite all the lessons from the past century and the financial crisis, some people in this thread still argue that the market is going to regulate itself and the government should just stay out of it.
What's it going to take before you accept that public accountability is important? An end of civilization?
With contractors instead of employees the onus of paying taxes shifts to the unreliable individual. There is no way that this continues to grow unabated by legislation. Either these people will end up employees or they have to pay taxes using some kind of automated system special for the sharing economy.
Uber is eventually going to be fully automated. Lots of people ITT seem to be ignoring the fact that Uber will eventually have no need for human drivers. I can't help but feel that the parties driving legislation that harms Uber as a company have this in mind.
Exactly. Uber is doing all of the work on the regulation front, which benefits any company wanting to do the same thing. And I would imagine the barrier to entry is already fairly low.
Uber is behaving extremely anti-competitive, as far as directly calling Lyft rides and then cancelling as soon as the car arrives during important days (like Christmas) hundreds of times.
Uber has been fighting against other competitors, too, with predatory pricing, or by directly trying to use the regulations (that uber itself breaks) against competitors.
The barrier to entry for uber competitors is only going up since uber exists in several countries.
> Uber is behaving extremely anti-competitive, as far as directly calling Lyft rides and then cancelling as soon as the car arrives during important days (like Christmas) hundreds of times.
I heard about the recruitment tactics, but I've never heard about holiday cancellations.
I've seen that before, but it's what I was referring to as "recruitment tactics." It seems pretty clear that the primary thing these people were trying to was to recruit drivers (and canceling drivers they'd already spoken to), not systematically disrupting Lyft service. For one thing, the scale is just too minuscule to matter. In a market where Uber is doing a million rides per day, 5,000 rides over months is nothing.[1]
That being said, disrupting availability on sensitive days (ex. holidays) could make a lot more sense in terms of sabotaging a competitor, which is why I was keen to see evidence of that. Unfortunately the link you provided has no evidence of holiday cancellations.
True, but I think that the fact that they're using these anti-competitive practices indicates they don't have that firm hold. Predatory pricing will only work as long as they keep doing it. Although I've heard stories of the opposite, where people really get gouged during surge pricing.
