Uber Ruling Could Cripple Sharing Economy - InformationWeek

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Uber Ruling Could Cripple Sharing Economy

A foolish decision by the California Labor Commission represents a startling change in the way we view the sharing economy.

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The California Labor Commission ruled that Uber drivers are employees, proving that the agency knows nothing at all about technology. If this ruling becomes the standard government reaction to companies that engage in the sharing economy, there will be no sharing economy of which to speak.

At the heart of the ruling is the fact that Uber has standards for its contractors. It requires a certain quality of vehicle, maintenance, and basic courtesy. An Uber "employee," Barbara Berwick, filed a complaint with the commission saying that Uber owed her reimbursable expenses she incurred while working for Uber. These expenses included routine maintenance on her vehicle, which is not owned by Uber.

Berwick said in the filing, "Defendants [Uber] hold themselves out as nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation," she said. "The reality, however, is that Defendants are involved in every aspect of the operation."

Basically, the ruling is saying that, because Uber doesn't want you to show up in a rusting hulk that might break down on the way to airport, you are an employee.

(Image: Jason Tester Guirrella Future via Flickr)

(Image: Jason Tester Guirrella Future via Flickr)

And basically, the commission is saying that if I rent my house for a weekend on AirBnB, that makes me an employe of AirBnB .

Granted, the commission is quick to point out the ruling only applies to Berwick and isn't "policy." But you can bet every Uber driver will be gathering Jiffy Lube receipts at this point and filing a similar claim. You can also bet that courts and other labor commissions will be looking at cases like this.

Here's the thing. If Uber drivers are "employees," one can make the argument they are owed benefits, insurance, and all other things that usually apply to a full-time employee. If everyone who is a major participant in the sharing economy is considered an "employee," the business model simply doesn't work.

[ And the sharing economy is supposed to grow to $335 Billion by 2025. Read The Sharing Economy: Access Is The New Ownership . ]

You can decide individually whether you care about such a thing. Uber, specifically, has often been criticized over the safety of its drivers and passengers. AirBnB has had issues with theft and damages. Maybe the sharing economy is a bad idea.

Whatever you think of the sharing economy, it seems strange that someone making their own hours, using their own equipment, on their own time, making money when they choose, is considered an employee simply because they need to meet a certain minimum standard of service. If that's what an employee is, then I plan to show up at work tomorrow whenever I feel like it, write an article whenever I get around to it, and then ask for InformationWeek to reimburse me for the use of my household electricity since I work from home.

David has been writing on business and technology for over 10 years and was most recently Managing Editor at Enterpriseefficiency.com. Before that he was an Assistant Editor at MIT Sloan Management Review, where he covered a wide range of business topics including IT, ... View Full Bio

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David Wagner
David Wagner,
User Rank: Strategist
6/24/2015 | 12:47:18 PM
Re: enforcing standards
@kstaron- I think the one difference is that in the case of a work from home freelancer, the product the customer sees is the final product in a file. In the Uber case, the customer sees the car. If an uber driver picked me up and there was garbage and nasty stuff ont he floor, i might not use Uber again even though the other cars might be clean and I may never see that driver again.
User Rank: Ninja
6/24/2015 | 10:54:35 AM
enforcing standards
As a freelancer as long as my computer can get my work done and it gets there on time it doesn't matter if it is an ancient desktop or a streamlined tablet. It only matters that I get it done, and do it well. While I may not always set my rates I say no to clients with low rates. When a client demands I purchase a certain program, that needs to be out of their pocket unless we negotiate something else.

If Uber is enforcing standards to a car then it seems maybe they should pay her for at least part of upkeep.  If they also set rates, they start sounding more and more like employees. (As opposed to if they only set how much money UBER got for each ride.)
User Rank: Ninja
6/18/2015 | 9:57:56 AM
Re: Uber Ruling Could Cripple Sharing Economy
Cleary the California Labor Commission doesn't really get the idea behind freelancers or temporary workers/contractors and employees. This will sort itself out, but other States may follow their lead, and it will be harder to deal with in a non-West Coast atmosphere.

The other issue, and not one that I'm opposed to per se, is that as the sharing economy progresses, various unions will have a stronger foothold than usual to organized the contractors into a 21st century group. They may not be the unions of old, but adaptable organizations which benefit freelancers and contractors (moreso than the ones which currently exist).
User Rank: Ninja
6/18/2015 | 1:21:45 AM
Re: Uber Ruling Could Cripple Sharing Economy
I can definitely see both sides here. Compare Uber directly to a Taxi company (which, they get lots of flak for being able to  dodge existing Taxi regulations), and you see similiarities as well as differences. I've seen some people imply that they're more similar to an eBay, which is awfully disengenious. eBay doesn't regulate how you ship your stuff (what car you drive) , what prices you're allowed to charge (uber sets the rates), quality (as long as you mark broken stuff as broken). eBay sellers might be obsessive about maintaining high ratings, but they don't get kicked off without them (Uber drivers do get kicked off for low ratings).

What I haven't been able to find is what exactly the woman wanted to be reimbursed for. Don't Uber drivers sign some sort of agreement up front that they don't expect reimbursement (seems like a pretty large oversight otherwise)... it makes the court decisions seem a bit silly, but it still raises the question of whether Uber can put whatever they want in that agreement and have it all be kosher. Uber is definitely going out of their way to skirt the definitions and the regulations as closely as possible - which, in itself, is not a crime.  Maybe a new category is needed to distinguish the gray area between bona fide employee and truly independant contractor? The potential abuse of workers under the legal code is definitely independent of the technology here.

None of that is the real question here, though, is it? The real question is, do these old regulations really meet with the desires of the people, and if not, should they be changed? Should Uber have to match up with Taxi regulations (or employment regulations) in fairness to the Taxi companies , or should we let it kill them off the same way Netflix killed Blockbuster (nobody raised a regulatory red flag on Blockbuster's behalf)? In the US, at least, the one and only question that should matter is which one voters and taxpayers want. Now, as Gary_EL points out, it's a little more complicated than that. The people doing the work are taxpayers, too. it's a natural shifting of the economy as a result of technolgy, but that doesn't mean there's no need for regulation. Maybe Uber is on the right side of the law - but that doesn't mean every 'sharing' service will be.
User Rank: Ninja
6/17/2015 | 11:07:01 PM
Drivers aren't writers
When you're a freelance writer, and the only hazards you face are paper burns and eyestrain, being a contractor is fine, even though we have to pay double Social Security. Drivers face real-world dangers, and they need, among other things, worker's comp. I'm sick of employers trying to turn people into modern-day sharecroppers under the guise of independent contractors. Oh well, I suppose they can just say no one is available in America so they need to get more H1-B visas.
User Rank: Ninja
6/17/2015 | 10:15:07 PM
the first sharing economy ..
American was the first digital economy. American was the first ecommerce economy. If the court ruling like these become the norm, America will not be the first sharing economy. It may be South Korea, China or Sweden. Good for old-fashioned businesses; not good for startup businesses; not good for American people.
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