
Uber Drivers Deemed Employees by California Labor Commission - uptown
http://techcrunch.com/2015/06/17/uber-drivers-deemed-employees-by-california-labor-commission/
======
beering
Skimming through the doc, court findings are:

1) Drivers providing their own cars is not a strong factor - pizza delivery
employees also drive their own cars.

2) Uber "control the tools that drivers use" by regulating the newness of the
car.

3) Uber exercises extensive control over vetting and hiring drivers and
requires extensive personal information from drivers.

4) Uber alone sets prices, and tipping is discouraged, so there is no
mechanism for driver (as "contractor") to set prices.

5) Plaintiff driver only provided her time and car. "Plaintiff's work did not
entail any 'managerial' skills that could affect profit or loss."

6) Drivers cannot subcontract (presumably negating Uber's position as a "lead
generation" tool for contractors).

Sorry that these are out of order. Look on Page 9 of court documents for full
text.

~~~
djm_
Out of all those,

>Uber alone sets prices

is the killer one. I guess the only solution to that would be to make it more
of a market where drivers could choose their rate to compete.

~~~
nemo44x
Exactly. Independent contractors set their own pricing. If Uber would allow
the drivers to set their rates and then "hire" who they felt was best for them
(and then markup the price to the customer for their own profit) only then
would the drivers be in control of payment.

This is how every other independent contractor works.

~~~
viscanti
It's a different situation though. I've never seen any employee ever working
for two companies in the same "shift". I see lots of Uber drivers taking Lyft
trips.

Riders set the rates with demand based pricing and drivers choose which one
gives them the best opportunity at each trip request. That's a unique
situation, so a comparison to "every other independent contractor" misses the
point here.

~~~
Retric
It’s more common than you might think. A common example is jobs where 80% of
the time they just need someone there, and then someone does piecework at the
same time. EX: A night watchman who's also writting essays.

Also, Uber actively discourages this by penalizing drivers who skip to many
fares, which suggests they really don't want you to do this.

~~~
quadrangle
I believe that's actually illegal even if common to work on a second job at
your first job. Don't quote me, I'm not sure. Anyone know more?

~~~
__z
Illegal or against company policy? There's a big difference.

------
grellas
A few thoughts:

1\. This is an appeal from a decision by a hearing officer of the California
Labor Commissioner. Most of the time such officers spend their days hearing
things such as minimum wage claims. Hearings do not follow the strict rules of
evidence and are literally recorded on the modern equivalent of what used to
be a tape casette instead of by a court reporter. Such hearings might run a
few hours or, in a more complex case, possibly a full day as the normative
max. The quality of the hearing officers themselves is highly variable: some
are very good, others are much, much less than good in terms of legal and
analytical strengths. In a worst case, you get nothing more than a pro-
employee hack. The very purpose of the forum is to help protect the rights of
employees and the bias is heavily tilted in that direction. That does not mean
it is not an honest forum. It is. But anything that comes from the Labor
Commissioner's office has to be taken with a large grain of salt when
considering its potential value as precedent. Hearing officers tend to see
themselves as those who have a duty to be diligent in protecting rights of
employees. Whether what they decide will ever hold up in court is another
question altogether.

2\. Normally the rules are tilted against employers procedurally as well. When
an employer appeals a Labor Commissioner ruling and loses, the employer gets
stuck paying the attorneys' fees of the prevailing claimant on the appeal.
This discourages many employers from going to superior court with an appeal
because the risk of paying attorneys' fees often is too much when all that is
at stake is some minimum wage claim. With a company like Uber, though, the
attorney fee risk is trivial and all that counts is the precedential value of
any final decision. It will therefore be motivated to push it to the limit.

3\. And that is where the forum matters a lot. The binding effect of the
current Labor Commissioner ruling in the court is nil. The same is true of any
evidentiary findings. The case is simply heard _de novo_ \- that is, as if the
prior proceedings did not even occur. Of course, a court may consider what the
hearing officer concluded in a factual sense and how the officer reasoned in a
legal sense. But the court can equally disregard all this. This means that the
value of the current ruling will only be as good as its innate strength or
weakness. If the reasoning and factual findings are compelling, this may well
influence a court. Otherwise, it will have no effect whatever or at most a
negligible one.

4\. What all this means is that this ruling has basically symbolic importance
only, representing what state regulators might want as an idealized outcome.
Its potential to shape or influence what might ultimately happen in court is,
in my view, basically negligible.

5\. This doesn't mean that Uber doesn't have a huge battle on its hands, both
here and elsewhere. It just means that this ruling sheds little or no light on
how it will fare in that battle. You can't predict the outcome of a criminal
trial by asking the prosecutor what he thinks. In the same way, you can't
predict the outcome here by asking what the Labor Commissioner thinks. In
effect, you are getting one side of the case only.

6\. The contractor/employee distinction is highly nebulous but turns in the
end on whether the purported contractor is actually bearing true
entrepreneurial risk in being, supposedly, "in business." There are a number
of factors here that do seem to support the idea of true entrepreneurial risk
but that just means there are two sides to the argument, not that Uber has the
better case.

7\. In the end, this will be decided in superior court and then, likely, on
appeal to the California courts of appeal beyond that. It will take years to
determine. In the meantime, the Uber juggernaut will continue to roll on. So
the real question will be: should we as a society welcome disruptive changes
that upset our old models or should we use the old regulations to stymie them?
Courts are not immune from such considerations and, as I see it, they will
apply the legal standards in a way that takes the public policy strongly into
account. It will be fascinating to see which way it goes.

~~~
emodendroket
> In the meantime, the Uber juggernaut will continue to roll on. So the real
> question will be: should we as a society welcome disruptive changes that
> upset our old models or should we use the old regulations to stymie them?

That seems like a loaded way of phrasing the question.

~~~
sharkyl
You can say that again.

Here's another loaded way to ask the question: should we as a society welcome
disruptive changes that allow companies to turn defacto employees into at-risk
"entrepeneurs", or should we rely on over a century of established practices
for protecting employees from being unfairly exploited?

------
tomasien
I'm curious to read this argument. For all the hand wringing over Uber drivers
as 1099 workers, they seem to be the very definition of contractors. They
provide their own equipment, keep their own hours, NEVER have to work if they
don't want to and 0 consequences for working or not working specific hours,
etc. What is it about them that makes the employee like? Anyone know?

Edit: it appears that the critical factor they considered was whether or not
the driver could have operated their business independently of Uber. They said
they could not. They also cited the fact that Uber controls the way payments
are collected and other aspects of operations as critical to showing
employment. [http://www.scribd.com/doc/268946016/Uber-v-
Berwick](http://www.scribd.com/doc/268946016/Uber-v-Berwick)

~~~
CPLX
I read the whole thing. There are a couple relevant sections but this one
stands out to me as the best succinct summary of the argument:

"Plaintiff's car and her labor were her only assets. Plaintiff's work did not
entail any 'managerial' skills that could affect profit or loss. Aside from
her car, Plaintiff had no investment in the business. Defendants provided the
iPhone application, which was essential to the work. But for Defendant's
intellectual property, Plaintiff would not have been able to perform the
work."

That's a pretty solid line of reasoning, to be honest. Note that for those
unfamiliar with the subtleties of legal jargon, the words "but for" have a
specific meaning that relates to causality. In other words that last sentence
roughly translates to "if not for the existence of the iPhone app there would
be no distinct or independent business here."

In addition, earlier in the ruling they address the fact that mere ownership
of a car has historically not been considered the same thing as owning
specific "tools" required to perform a job, and it cites the fact that
previous precedent for delivery drivers that they are employees, and merely
owning the car and paying for gas does not change that.

~~~
foobarqux
I don't think "but for" is legal jargon or has any special meaning in law,
apart from the normal English meaning.

~~~
CPLX
You're correct that it doesn't have some wildly divergent meaning from plain
English, but it is in fact a legal phrase that has a lot of history and
specific meaning behind it:

[http://www.law.cornell.edu/wex/but-
for_test](http://www.law.cornell.edu/wex/but-for_test)

[http://dictionary.law.com/Default.aspx?selected=113](http://dictionary.law.com/Default.aspx?selected=113)

[http://legal-
dictionary.thefreedictionary.com/%22But+for%22+...](http://legal-
dictionary.thefreedictionary.com/%22But+for%22+Rule)

------
Dwolb
This is a good ruling for workers, but maintains society's status quo. That
is, Uber has realized significant margin gains by pushing all risk of carrying
passengers and car maintenance onto its drivers. Therefore, this risk is
transferred to either drivers (who are on average mot equipped to handle this
risk) or insurance companies (who pass the costs on to their entire insurance
pool) and not borne directly by Uber nor its customer base. By classifying
drivers as employees, risk becomes better aligned.

Now, what society is really missing out on is an opportunity or reason to
transition from employer-based benefits to government or society-based
benefits. This ruling will postpone a public discussion on the role of
employer-based insurance and benefits.

~~~
dylanjermiah
>This is a good ruling for workers,

Is it? If this were to remain, the large majority of the drivers will not have
a position to fill. It will not be viable.

>That is, Uber has realized significant margin gains by pushing all risk of
carrying passengers and car maintenance onto its drivers

No one has 'pushed' anything. Drivers are consensually agreeing to drive
because the pay they receive values their time.

>Therefore, this risk is transferred to either drivers (who are on average mot
equipped to handle this risk)

How are they not equipped?

>Now, what society is really missing out on is an opportunity or reason to
transition from employer-based benefits to government or society-based
benefits. This ruling will postpone a public discussion on the role of
employer-based insurance and benefits.

What society needs is less people forcing them to do what others think is
best.

~~~
mootothemax
_Drivers are consensually agreeing to drive because the pay they receive
values their time._

I just want to make sure that I understand you fully:

You believe that Uber and its drivers negotiate as equals?

~~~
dylanjermiah
'equals' is incredibly hazy. There will never be a perfect equilibrium but it
is close, if drivers could command better pay at a better establishment why
would they choose to drive for Uber?

~~~
mootothemax
_There will never be a perfect equilibrium but it is close_

Thanks for your clarification.

Since you apparently believe that they're negotiating as "close" equals, I
don't believe that you and I can have a constructive conversation about this,
and so I'm going to bow out now.

~~~
dylanjermiah
Before you do, please answer the question I asked.

~~~
sp332
(I'm not mootothemax and if I were you I wouldn't expect a reply after someone
has left the conversation.)

They are not equals, the drivers probably can't get a better deal anywhere
else, and the law should be changed to make sure drivers can get a better deal
in the future.

~~~
dylanjermiah
> and the law should be changed to make sure drivers can get a better deal in
> the future.

What law and how will it work?

>the drivers probably can't get a better deal anywhere else

You just made my point, if driving for Uber was terrible, people wouldn't do
it. They do because it's there best alternative.

~~~
sp332
>You just made my point, if driving for Uber was terrible, people wouldn't do
it.

Of course they would, because there is no alternative.

~~~
milesokeefe
Are Lyft and Sidecar not alternatives?

------
nugget
I wonder -- if Uber converted drivers in California to employees and dealt
with the increased costs (passing them on to riders) but also prevented the
now-employed drivers from driving with competing services (Lyft) -- whether
the company wouldn't actually become even more valuable than they already are.
If you are driving for both services but Uber comprises 80% of your volume and
Lyft 20%, it's an easy decision to make. Given that the real asset for all
these sharing economy companies is their elastic work forces (drivers and cars
for Uber, residents and homes for Airbnb), the CLC may have just created an
entrenched monopoly without realizing it.

Beyond that there is a really interesting debate as to whether sharing economy
jobs are an end-run around minimum wage laws, rendering such laws meaningless
for certain industries going forward. If the majority of workers are turned
into 1099 consultants, but are doing effectively the same jobs (drivers,
delivery people, etc) that employees did in the past, what does that mean for
society?

~~~
toomuchtodo
> Beyond that there is a really interesting debate as to whether sharing
> economy jobs are an end-run around minimum wage laws, rendering such laws
> meaningless for certain industries going forward. If the majority of workers
> are turned into 1099 consultants, but are doing effectively the same jobs
> (drivers, delivery people, etc) that employees did in the past, what does
> that mean for society?

Please excuse my demeanor, but it means that if the "sharing" economy is
really the "tech companies sidestepping worker/labor protections with no
repercussions", then society is screwed.

~~~
clarkmoody
What does it say about what the Uber drivers think about "worker/labor
protections" that they are willing to work without those protections of their
own free will?

 _> society is screwed_

Please elaborate.

~~~
toomuchtodo
Labor protections are in place to ensure workers can support themselves. To
subvert those regulations pushes quality of life down for a populace.

Walmart is guilty of this to a lesser extent, as while they categorize their
workers properly, they pay them so little that they have company-provided
documentation on how to collect social benefits to supplement their income,
which means _we 're subsidizing Walmart's labor costs directly_.

This will be less of a problem as the minimum wage rises across the country,
and companies are held accountable for proper worker classification.

~~~
clarkmoody
Your first point is refuted by your second point...

According to you, Walmart employees cannot support themselves, even though we
have a raft of labor protections. Walmart is not subverting any labor laws, as
far as I can tell.

As to your point about minimum wage: how does increasing the cost of labor
ensure that more people will have work? When you are unemployed, you cannot
support yourself.

The bottom line is that when two parties enter into a contract voluntarily,
that should be the end of the matter.

~~~
functional_test
> The bottom line is that when two parties enter into a contract voluntarily,
> that should be the end of the matter.

That is a very black and white view; real life has a certain nuance that just
isn't captured by blanket statements like this.

You'll miss things if you limit yourself to a single level of abstraction:
while it makes sense to the two parties to look at it like that, there is also
a larger-scale, societal interest that certain sorts of contracts not be
allowed. Thus, society makes rules about contracts and employment. For
example, we ban slavery, indentured servitude, and child labor because as a
society, we've determined that those are exploitive (even if you can get
children who would willingly work for you, or people who would sell themselves
to you).

These sorts of laws are what make us a society. For an example of a what
happens without them, take a look at Somalia.

------
dotBen
Just to point out -- the California Labor Commission’s ruling is non-binding
and applies to a single driver, it's not a class-action or applies to anyone
else. Reports of the demise of Uber due to 'all partner drivers now being
employees' is grossly exaggerated. Uber is also appealing. [disclosure: I work
for Uber]

(see
[http://newsroom.uber.com/2015/06/clcstatement/](http://newsroom.uber.com/2015/06/clcstatement/))

------
jellicle
This was obvious from the beginning. There's really not the slightest doubt
that all government authorities are going to classify Uber employees as
employees, except perhaps a few that might be bribed/pressured into not doing
so.

Uber controls every aspect of the business, from the fares charged (and how
much profit Uber will take from each) to the route taken to the conditions of
the vehicle to preventing subcontracting. It isn't even close or arguable. As
the ruling points out, these people aren't independent drivers with their own
businesses that just happen to have engaged in a contract with Uber, nor could
Uber's business exist without them.

The short version:

[http://www.irs.gov/uac/Employee-vs.-Independent-
Contractor-%...](http://www.irs.gov/uac/Employee-vs.-Independent-
Contractor-%E2%80%93-Seven-Tips-for-Business-Owners)

~~~
lnanek2
Doesn't seem obvious at all to me since I know several drivers who do rides
for several systems at the same time. How could they be an employee or three
companies at once? They aren't, they are clearly contractors.

You can see multiple people stating the same here about driving for multiple
services: [http://qr.ae/7y7fv7](http://qr.ae/7y7fv7)

I think this is just another ruling by a clueless government that has no clue
what is actually happening on the computers involved.

~~~
cdcarter
Many people work for multiple jobs at once. I've been a receptionist who codes
for someone else at the same time, and I've been a crowd manager while doing
email for my other job. Both were time sheet W2 employee relationships.

This isn't about computers whatsoever. This is about the requirements and
business relationship between Uber and Uber drivers. The relationship does not
allow Uber drivers to subcontract, negotiate prices, and had control over
profit and loss. Uber drivers are employees.

------
gmisra
The right answer is that the "on demand economy" does not fit into existing
labor structures, and trying to shoehorn these new jobs into current legal
frameworks is probably doomed to confusion. This is especially complicated
because, in the United States, too much of the social safety net is explicitly
tied to employer-employee relationships (workers comp, unemployment,
healthcare, etc).

What I want is confidence that somebody providing a service to me is provided
these benefits - if you work 40 hours/week in "on demand" jobs, you should
receive commensurate coverage from the safety net, and you should receive at
least the mandated minimum wage. If you work 10 hours in a week, you should
receive the pro-rated equivalents of those services. This is, of course,
complicated - how do you account for people working two services at the same
time, or the "uber on the couch" issue, or who pays for vehicles and other
capital goods. But pretending that existing labor laws will cover the changing
workforce is silly.

We hear all the time about how the nature of work, especially service work is
changing. It seems like a logical consequence that the nature of how society
classifies, supports, and regulates work should also change. Uber, et al, and
their VC comrades have a huge opportunity to shape the future of how people
work, and how the social safety net works - to effect real disruption.

Based on their actions, however, it is hard to conclude that Uber, et al are
actually interested in this discussion, beyond the marketing rhetoric it
enables. As far as I can tell, they view the friction between existing laws
and their business model as a profit opportunity and not a leadership
opportunity. And so the inefficient behemoth of government regulation will
inevitably step in.

~~~
TheOtherHobbes
>you should receive commensurate coverage from the safety net

It's going to be hard to make that stick when the _entire business model_ of
these companies is based on avoiding as much personal, social, and corporate
responsibility as possible.

The real question is political - should we consider this kind of
entrepreneurial activity a good thing, when its effects are so uniformly
negative for most of the population?

And that's an old question - who should benefit the most from the social value
created by work, and why?

At the moment the game is rigged to reward those who are motivated primarily
by greed and self-importance. I'd suggest that's not just an unintelligent way
to do these things, it's also a really expensive way - because the value of
the missed opportunities created by lost economic activity and lack of broad
spectrum prosperity is almost unimaginably huge.

------
codecamper
I'm surprised that Uber discouraging their drivers to drive for other
providers was not called out.

From what I understand, if you are an Uber driver and you do not accept a call
too many times, Uber will simply stop giving you ride requests. This
effectively squashes a driver's desire to drive for other networks because if
he/she is busy with another network's ride when an Uber request comes in, he
cannot accept it. Do that that some unknown number of times, and you don't get
more work from Uber.

------
steven2012
The ruling is not unexpected at all. After the ruling against Microsoft back
in the 90s on contracting, it's pretty clear that a business needs to be very
careful how they hire contractors, so that they don't become implicit
employees. Google has to jump through hoops so that their contractors aren't
considered employees (only work for 1 yr max, etc).

I'm curious how much this will affect Uber and what it will do to their
business model. If I had to speculate, it would be that it becomes
unprofitable almost instantly, but they do have a gigantic warchest, so maybe
they can fight the ruling or figure out another way to classify their drivers.

Maybe they can advertise fares and jobs ("This person wants to be driven from
SFO to Mountain View") and drivers bid on it like an auction. I wonder if that
might change the equation? But then it means that drivers will have a lot more
friction in the process.

~~~
sjg007
They will do tips. They will do a time sensitive auction. They will set a
minimum bid (by the customer).

------
nemo44x
Just throwing a hypothetical out there. What if this sticks and the drivers
decide to organize with a union and collectively bargain a living wage,
benefits, etc?

What would be the value of Uber (and related businesses)? Would it stay in
business even? How many VC's would lose fortunes over Uber going nearly to 0?
Would this be the popping of what some suspect is a private equity bubble as
the effects of this ripple throughout?

Regardless, it would be a very different business with a very different
valuation.

~~~
mcafeeryan92
My thought on this is that the current Uber valuation is related very strongly
to the idea of their future worth, which is currently quite optimistic due to
their self-driving car research. Uber without having to pay drivers at all is
still the end-goal for them, so it may just mean that they need more capital
investment in the short-term and investors may be happy to do so.

~~~
nemo44x
I don't believe self driving cars will be practical in the next 10 years. Not
at the level Uber would benefit.

I don't understand why self driving cars are good for Uber. Uber is successful
right now due to he network effect of their drivers. Once self driving cars
are a reality you will see numerous offers for this service with all of them
racing to the bottom.

Bigger fish like Apple and Google would be able to siege them and starve them
out as pricing races to the bottom. Uber is valuable _because_ of their
drivers, not despite their drivers. In the age of self driving cars - Uber
won't be able to compete.

~~~
deckar01
The data Uber is collecting from their app will be very valuable once they
start using self driving cars. Google may have a lot more data coming in from
Maps, but it is noisy and unfiltered. Uber has a geospatial history of every
ride along with the metadata needed to make it truly useful.

~~~
rodgerd
> Google may have a lot more data coming in from Maps, but it is noisy and
> unfiltered.

Because if there's one thing we know about Google it's that they're terrible
at slicing and dicing large volumes of data.

------
jussij
The only problem I have with Uber is they get away with not having to compete
on a level playing field.

I live in Sydney Australia and catch a fair few taxis.

That taxi diver I use has to pay many $100,000.00 to buy a taxi plate just to
work (or work for someone who has bought such a plate), but the same Uber
driver does not have such an overhead.

Also, that taxi has to pay insurance in case I'm injured while I'm in their
cab, another cost the Uber driver does not have to cover with an insurance
policy.

So government has to decide, does it want to eliminate those costs and make it
a level playing field, making it an effective free for all.

But why politicians will never do that is because the first crash with the
resulting insurance claim will bring the industry to it's knees and from that
point on all hell will brake loose.

At present the politicians just don't want to make a decision because it is
just a little too hard.

~~~
woah
Uber cannot be applauded enough for sidestepping the legalized monopoly and
bribery of "plates" or "medallions".

~~~
bigdubs
There is a reason the cities regulate the number and type of cabs on the road;
too many cabs leads to increased congestion being one reason. It is also
important to license cabs and certify the drivers of said cabs. The main
reason though, is so that there isn't a glut of taxi drivers chasing a fixed
rider pool and ensures that drivers can make a decent living off taxi driving.

The plate/medallion system gets out of hand when non-driver entities (read,
taxi companies) can own the medallions and buy large quantities of them and
lease them out at a profit, driving up the barrier of entry.

~~~
seizethecheese
What's the argument that taxis increase congestion? It seems it should do the
opposite. First, people are more likely to share taxis than carpool. Second,
taxis drastically reduce parking congestion since dozens of people can utilize
the same vehicle in a day.

~~~
bigdubs
The problem is that there are literally too many cabs on the road. Cabs
rarely, if ever park, and are constantly driving. Parking, and this may seem
counter-intuitive, reduces road congestion. If you have many vehicles
constantly being driven, it increases congestion.

~~~
rodgerd
> Cabs rarely, if ever park, and are constantly driving

If only. Taxis in my neck of the woods park everywhere, including general
parking, bus stops, and the middle of the road while loitering for fares.

------
shawnee_
Beekeeping analogy: both über and lyft are hives. The California Labor
Commission's ruling does more to preserve hives in general (and thus the well-
being of bees (drivers) as a whole), rather than any specific hive. Yeah, it's
making things a little harder on one specific hive right now, but maybe this
just means more hives will be popping up. It's the right call.

The phenomenon in nature is for bees to switch hives if theirs is in demise.
"Any worker bee that is bringing in food is welcomed." [source:
[http://www.beemaster.com/forum/index.php?topic=8374.0](http://www.beemaster.com/forum/index.php?topic=8374.0)]

------
a-dub
To be clear, this is not new regulation. This is a hearing that weighed the
facts against the current set of laws as they are written. Under those laws,
they're pretty clearly employees.

Changing the existing laws is a different issue entirely. There are serious
pros and cons on both sides and the right answer is not obvious.

------
mikeryan
I think Uber can maybe weather this storm but I wonder how this will trickle
down to the smaller personal service players like TaskRabbit/Caviar/Luxe etc
who employ independent contractors.

~~~
toomuchtodo
If the IRS determines the same, Uber will be on the hook for back taxes and
penalties for all of its US drivers. I don't think Uber can weather that
storm.

~~~
smileysteve
Theoretically, if this is the first driver to report Uber for
misclassification, then the contractors have been paying the correct amount in
self employment taxes.

Über will be on the hook for penalties for the misclassification, but there is
reason to believe that the drivers knew that they were classified as
contractors and no imminent tax bill is due.

~~~
toomuchtodo
Uber will face the penalties and back taxes (employer payroll tax portion),
not the drivers.

------
bdcravens
Won't this mean that every single "employee" covered by this will have to file
amended tax returns?

~~~
facetube
...and potentially get thousands of dollars in employer-paid FICA and payroll
tax back, assuming it sticks (which is a big if).

------
encoderer
Drivers are just temporary anyway. Uber is going to be the company to beat
when autonomous cars make _Autos as a Service_ a huge business. I see that,
and not some low-margin package delivery service, as the driver of their
future growth.

~~~
nemo44x
Uber won't be able to compete in the age of automated drivers. Uber is
successful _because_ of their drivers, not _despite_ them. The network effect
of having the most drivers lets Uber maintain its dominance in the market.
_Autos as a Service_ will be a race to the bottom and there will be a smaller
gateway to entry than there is now.

Uber is a bad investment.

~~~
encoderer
You act like it's a big binary shift one day. But it's not.

Uber has massive consumer mindshare, and its still growing fast. When they
start phasing-in self driving cars you will have a day where your UberPool
ride to work was driven by a human, but your UberPool home happened to be an
autonomous car.

Uber is building a brand as the go-to transportation service and that won't be
displaced just because another company deploys a fleet of autonomous cars with
their own app. Even if that company is Google. Sure, it's a competitive
threat, and I have no idea if Uber will be a brand people know in 25 years.
But in 5-10? I think they are positioning themselves for dominance as the
provider of autonomous transportation.

~~~
nemo44x
It's still a race to the bottom. Competitors will compete on price (the only
thing that really matters at that point) and those with larger wallets or who
manufacturer the automated cars (or likely both) will be able to out-price
them.

------
kposehn
From Uber:

> Reuters’ original headline was not accurate. The California Labor
> Commission’s ruling is non-binding and applies to a single driver. Indeed it
> is contrary to a previous ruling by the same commission, which concluded in
> 2012 that the driver ‘performed services as an independent contractor, and
> not as a bona fide employee.’ Five other states have also come to the same
> conclusion. It’s important to remember that the number one reason drivers
> choose to use Uber is because they have complete flexibility and control.
> The majority of them can and do choose to earn their living from multiple
> sources, including other ride sharing companies.

------
codegeek
Isn't Uber concept similar to AirBnB ? DOes this mean AirBnB users are also at
risk of being classified as employees of Airbnb ? Uber, you drive your own
car. Airbnb, you rent your own apartment.

~~~
abandonliberty
Nope, the article shows otherwise. For example:
[https://news.ycombinator.com/item?id=9732231](https://news.ycombinator.com/item?id=9732231)

4-6 are madly different for airbnb than Uber:

4) Uber alone sets prices, and tipping is discouraged, so there is no
mechanism for driver (as "contractor") to set prices. 5) Plaintiff driver only
provided her time and car. "Plaintiff's work did not entail any 'managerial'
skills that could affect profit or loss." 6) Drivers cannot subcontract
(presumably negating Uber's position as a "lead generation" tool for
contractors).

AirBnB is facing an entirely different challenge - residential vs commercial
zoning, hotel taxes, impact on the normal rent market, etc. I'm seeing laws
coming up either seeking to regulate & tax them as hotels, or outright ban
them as in santa monica: [http://www.npr.org/sections/thetwo-
way/2015/05/13/406587575/...](http://www.npr.org/sections/thetwo-
way/2015/05/13/406587575/santa-monica-cracks-down-on-airbnb-bans-vacation-
rentals-under-a-month) Clearly a residential rental market isn't sustainable
when you can easily earn at least double with short term rentals.

------
mayneack
This makes all the R&D into driverless cars worth it. Driverless cars can't be
employees.

~~~
josefresco
Exactly. This is the equivalent of Netflix mailing DVD's and transitioning to
streaming. If Uber can pull it off they'll survive the regulatory assault.

~~~
cehrnrooth
Not necessarily. As other people have pointed out, Uber's business model,
margins, and valuation are based on shifting their costs onto their drivers
(especially the capital costs of vehicles).

Switching to driverless raises the question of who owns the vehicles they'll
be using, and if they're the ones owning the vehicles in their fleet that
represents a major shift in capital expenses and ongoing maintenance costs.

~~~
josefresco
Good point about ownership of the vehicles. Maybe it's more of an "insurance"
policy in case their regulatory battles go poorly.

I think if cities and states had to choose between Uber _with people_ (more
jobs) and Uber with autonomous vehicles (less jobs) they would or _should_
pick the former.

~~~
dragonwriter
> I think if cities and states had to choose between Uber with people (more
> jobs) and Uber with autonomous vehicles (less jobs) they would or should
> pick the former.

As much as cities and states can regulating employment rules, and taxi rules,
they can also regulate rules for use of autonomous vehicles. So, when it comes
down to it, they don't _have_ to choose a regulatory regime that makes
_either_ of those options viable.

------
chx
You all downvoted my comment three weeks ago: Uber is constantly trying to run
from the law but eventually the law will catch up with them and finish this
farce. Good.

Well, there you have it.

------
paulsutter
If this sticks, it just means that Uber drivers will get paid less in cash,
more in benefits, and lose the ability to take business tax deductions.

Is that really better for the drivers? Sounds worse to me.

I ask because many people have been claiming Uber is a bad actor for making
drivers contractors, but it's not clear to me that it's a big win for the
drivers to be classified as employees. Actually it seems worse in many ways.

------
randomname2
Reuters and Techcrunch may have jumped the gun here. This ruling only applies
to a single driver. Reuters has updated their headline accordingly now:
[http://www.reuters.com/article/2015/06/17/us-uber-
california...](http://www.reuters.com/article/2015/06/17/us-uber-california-
idUSKBN0OX1TE20150617)

Uber's response:

"Reuters’ original headline was not accurate. The California Labor
Commission’s ruling is non-binding and applies to a single driver. Indeed it
is contrary to a previous ruling by the same commission, which concluded in
2012 that the driver ‘performed services as an independent contractor, and not
as a bona fide employee.’ Five other states have also come to the same
conclusion. It’s important to remember that the number one reason drivers
choose to use Uber is because they have complete flexibility and control. The
majority of them can and do choose to earn their living from multiple sources,
including other ride sharing companies.'

    
    
        – Uber spokeswoman

------
Spearchucker
Uber and Lyft are operating a model that clearly works for customers. And yet
they rightly face legal issues.

The thing that perplexes me is that existing taxi companies, who are licensed
and otherwise compliant with the law, don't adopt the best parts of Uber and
Lyft?

Why can't I call a black cab in London the way I call a ride from Uber?

~~~
seehafer
They're trying that in SF. It's called Flywheel. And it's more expensive than
Uber and not as good of an experience, because you have no power to rate down
poor drivers.

~~~
gmisra
This is incorrect, after every ride you have the opportunity to rate your
experience on the same low information 1-5 star scale as Uber.

It's more expensive because the cost is not subsidized by VC capital, and the
rates are regulated in order to provide wage floors for the drivers (amongst
other things). Not everybody values minimum wages, but it's worth knowing why
the cost is higher.

------
jacquesm
This is going to put a knife into a lot of 'modern' start-ups. The theme where
the company sets the prices, controls the payments and so on and where the
people doing the work are contractors without employee protection or benefits
applies to many of the business models of the new middle men.

------
pbreit
I tend to agree with Uber here:
[http://newsroom.uber.com/2015/06/clcstatement/](http://newsroom.uber.com/2015/06/clcstatement/)

I don't think this ruling will have much of an impact on anything.

------
yueq
What are the impacts to Uber if drivers are employees?

~~~
titanomachy
The most important changes would be that

\- Uber has to take on a lot more of the associated risks (in practice that
means paying a lot more insurance)

\- Uber has to pay benefits to their drivers and ensure that their hourly
wages meet local minimums

EDIT: Or, Uber has to change the way it operates so that it can continue to
treat its drivers as contractors.

------
sudioStudio64
The regulations on taxi drivers exist for a reason. Uber found a way to skirt
some of those regulations for a time. Avoiding that regulation created a
revenue stream that they used to operate and grow. It was always in danger of
regulators catching up to them.

If you read some of the driver's reports then it becomes hard to really buy
their "big taxi" schtick. That being said, they obviously provided something
that people want. Taxi companies will have to adjust to this. (In some places
like SF they already are.) In the end, I think that Uber will go the way of
Napster and the taxi companies will end up adopting their techniques the way
that the big record companies did.

------
DannyBee
This should be 100% not shocking to anyone (including Uber, i expect). Given
their recent executive hires, i'm sure they saw this coming, and already have
an appeal strategy.

From a legal standpoint, riding the edge rarely works. Look at what happened
to Aereo.

~~~
bsder
Aereo is a really bad example to cite since it looks very much like they were
simply lying through their teeth rather than riding the tech edge.

~~~
DannyBee
???? AFAIK, they were playing the edge of the law, and lost.

~~~
bsder
They claimed that they were receiving the public signals on their tiny little
antennas which were significantly under the quarter wavelength that you need
to receive them.

While maybe possible, the science and engineering were continuously obfuscated
(for no really good reason--since this kind of advance would be very
patentable and profitable), and they never actually produced a convincing
demonstration that they were doing what they actually claimed.

If they were actually doing this, they were skirting the edge of the law.

In reality, they seemed to be receiving the signals on a single big antenna
elsewhere, and then copying from that signal. This is quite clearly illegal in
current law, and is what they actually got slapped for.

------
bhouston
What is the expected cost to Uber of this change?

~~~
shivpat23
If this sticks, Uber cannot absorb that cost and would have to shed many of
the drivers - rendering Uber, as we know it now, defunct.

~~~
yincrash
Uber does exist in more than just California.

~~~
ceejayoz
The IRS exists in those other areas, though, and may take a similar look at
their operations.

------
c-slice
Who is Rasier LLC? This seems to be some sort of shell corp for Uber's
insurance.

------
todd3834
I was asking about this a little while back and no one chimed in:
[https://news.ycombinator.com/item?id=9551467](https://news.ycombinator.com/item?id=9551467)

------
joshjkim
You can estimate how much this will cost Uber in CA as follows: $0.56
multiplied by total miles driven by UberX drivers over all time.

It’s almost as simple as that, since damages were given out almost entirely on
those grounds.

I'll leave it to HN to figure out a guess on mileage =)

Some other interesting notes:

Plaintiff was engaged with Uber from July 23 to Sept 18, less than 2 months (p
2)

She worked for 470 hours in that time, so quite a bit (p. 6)

Damages broken down as follows: $0.56/mile reimbursement, for a total of
$3,622, tolls for $256, interest of $274, for a total of $4,152 (p10)

Claims for wages, liquidated damages and penalties for violations were all
dismissed (p11)

~~~
joshjkim
Side note: the $0.56 is an IRS number, and therefore federal, so could even be
used as a proxy for all US =)

------
smiksarky
Control is the key factor when determining a 1099 vs W2 employee. FedEx has
been doing this for many years...which is why they just got fined a shit-ton.
I think Uber drivers will just unionize within the near future causing all of
their future driving 'employees' to get paid more - thus cutting profits -
resulting in either a new business model which is again bending the new rules,
or back to the way things were in the good ol' yellow cab.

------
6d6b73
If the ruling holds, Uber is finished. It will have to play by the rules set
by the same rules any taxi company has to follow.

------
pbreit
I don't think this holds. Either Uber makes slight changes that comply, some
other legal body re-evaluates or laws are changed slightly to accommodate.

This is too powerful of a concept to dismantle so easily. Being able to pick
and choose when you work and still be able to make decent earnings is very
useful to society.

------
anigbrowl
One of the downsides of so many tech companies being privately held due to the
unfashionability of IPOs (per the Andreessen Horowitz slide deck the other
day) is that we lose out on the price signals that a stock market listing
would normally provide in response to something like this.

------
marcusgarvey
How long will Uber's appeal take?

What happens if they lose?

Can other jurisdictions use this finding to change the way Uber operates?

------
reviseddamage
Despite this, Uber will still take over the taxi industry, albeit perhaps a
bit slower. The quality control over all its components that Uber exercises
will continue to bring market attraction to its services and will keep winning
market share.

~~~
Marazan
That depends on the cost of actually compiling with employment law. Once they
are no longer avoiding costs by illegally ignoring regulations and laws their
profits might vanish.

~~~
s73v3r
If that's the case, then it turns out their improvements weren't that
valuable.

------
jleyank
Stupid question, perhaps, but IANAL... How does the Uber situation differ from
the contractor situation Microsoft dealt with 5-10 years ago? If there's not
significant difference, isn't this all settled case law?

------
randomname2
HN mods:

Techcrunch have retracted their original headline as this ruling only applied
to a single driver, could we get the HN headline updated accordingly to "Uber
Driver Deemed Employee By California Labor Commission"?

------
gregoryw
Anyone who has hired contractors knows where the line is. The damning part is
the drivers have Uber provided iPhones in their cars. You have to provide your
own equipment to be a contractor.

------
brentm
This feels like an inevitability at their scale. Outside of the tech world it
was always going to be hard to sell their labor pool as contract when put
under the microscope.

------
beatpanda
I hope this spells the end of labor exploitation as an "innovation" strategy
by "technology" companies. It's getting sickening.

------
jkot
Does it not complicate things for drivers as well? As employees they may have
to tax entire income from Uber, including car expenses, maintenance etc..

~~~
breischl
I believe you can still deduct work-related expenses. That's what Line 21
"Unreimbursed Employee Expenses" on the 1040A is for, if I'm reading the
instructions correctly.

[http://www.irs.gov/pub/irs-pdf/i1040sca.pdf](http://www.irs.gov/pub/irs-
pdf/i1040sca.pdf)

------
bickfordb
If all California Uber drivers become employees, wouldn't Uber be on the hook
for reimbursing past Uber drivers for all past vehicle expenses?

~~~
prostoalex
Why, even the pizza delivery jobs quoted in the decision do not reimburse
vehicle expenses.

Shifting the expense burden to employer instead of employee creates wrong
incentives, e.g. one can then choose to deliver on a Hummer instead of a
Prius, because maintenance/fuel is paid for by someone else.

------
phpdeveloperfan
I'm surprised this happened, though I feel like it'll be appealed heavily.

------
aikah
Oops ... here goes Uber's competitive advantage ...

~~~
prodigal_erik
Have taxi companies managed to get a driver to actually show up when you call?
I thought Uber's advantage was not being completely dysfunctional, even when
they only had expensive town cars.

~~~
emodendroket
Yes, and so have livery services.

------
astaroth360
Please, please let Uber get pwned in the face for their general combative
business practices :D

Seriously though, they give the "ride sharing" economy a bad name.

------
big_data
Better hurry up with that IPO ...

------
zekevermillion
surely Uber is prepared for this eventuality and has a strategy ready to go

~~~
acveilleux
The first of which is probably to appeal and stall as long and as far as the
law allows.

------
hiou
Curious to see what the public markets will do in response. Nasdaq is taking a
bit of a slide as we speak.

------
louithethrid
Ueber always was a desert flower. The field it disrupted was scheduled to
vannish with automated cars anyway.

~~~
16bytes
Which is why it's one of the biggest investors of those automated cars.
Investors see this and will continue to fund them.

Furthermore, their earning potential doesn't instantly vanish. They just
compete with existing transportation companies on more even terms.

They have a vastly superior product; there's no reason why they won't continue
to be widely successful.

~~~
toomuchtodo
> Which is why it's one of the biggest investors of those automated cars.

No, Google is. Google has poured more money into self-driving car technology
than even auto manufacturers and Bosch.

> Furthermore, their earning potential doesn't instantly vanish. They just
> compete with existing transportation companies on more even terms.

Uber is nothing special. There is no stickiness. They are the Tinder of the
mobility space. People will use whomever is the cheapest and meets their
standard.

> They have a vastly superior product; there's no reason why they won't
> continue to be widely successful.

Unless they're forced out of existence through legislation and taxation. It
doesn't matter if you're a tech startup if you don't own the roads. Atoms !=
bits.

~~~
16bytes
> No, Google is.

I didn't say they were the biggest, but they are one of the big boys. They
just opened a huge robotics facility in Pittsburgh and yoinked dozens of staff
from CMU Robotics. They are betting big on automated transportation.

> People will use whomever is the cheapest and meets their standard.

Right. I will continue to use Uber/Lyft because it's cheaper/faster than
regular cabs. Heck, I'd even pay a slight premium because it's so convenient.

Have you even used regular taxis in a non-metropolis area? It sucks.

Even with employee drivers, Uber will be fine.

------
ThomPete
Considering that Uber eventually is going to replace them all with self
driving cars I think it's only fair that the people who help making Uber so
valuable gets part of the spoils of being in a company that grows this fast. I
am assuming this also means healthcare.

~~~
dylanjermiah
>I think it's only fair that the people who help making Uber so valuable gets
part of the spoils of being in a company that grows this fast

They get compensated via driving. Which is why they drive in the first place.

Why forcibly stop people consensually partaking in an activity? It's amazing
how far away bureaucrats can tell others what's best for them.

~~~
__z
>It's amazing how far away bureaucrats can tell others what's best for them.

It is absolutely amazing how people of today totally ignore history and
historical context. It has been years and years of struggles to enact labors
laws to give employees some very small amount of power in the extremely
unequal employee/employer relationship. You're acting like the time of The
Jungle and the Triangle Shirtwaist Factory fire were the good old days until
pesky governments got involved and ruined everything.

The US, comparatively, has labor laws that don't give much power to the
employee (see: at-will employment).

~~~
emodendroket
Yeah, but welcome to Hacker News.

------
dylanjermiah
"Uber is said to have more than a million drivers using the platform across
the globe."

If this ruling sticks, many of those drivers will no longer have a position.

~~~
mayneack
This, at least, will only affect the California workers, right?

~~~
dragonwriter
Strictly, this ruling affects one worker.

If it is appealed and eventually decided by a court whose decisions are
binding precedent -- and the first stage appeal from the Labor Commissioner's
ruling would be a state trial court, which is not such a court -- then it
would have broader effect.

OTOH, its likely a _guide_ to how the Labor Commission would rule on similar
cases brought by other Uber drivers, so, in a sense it _signals_ an effect in
California, without having a direct effect on any other worker.

ISTR reading about a Florida decision that found the same thing with regard to
Uber drivers, and IIRC there are a number of other labor complaints and
lawsuits pending on similar grounds.

------
Karunamon
So let me get this straight:

* People sign up with Uber

* They drive literally whenever they want

* Uber has no standards for their drivers other than "get good ratings" and "pass a background check"

..and they're considered employees? WTF?

~~~
ceejayoz
Uber has standards for their drivers, listed in the linked complaint. Vehicles
have to be specific model years, specific models for Uber Black etc., and well
maintained. Can't ask for / accept tips.

~~~
Karunamon
That doesn't really rise to the level of specifying how a work product must be
produced (one of the main differences between employees and contractors), only
some prerequisites. (They won't even let you drive if you don't have a >2004
4-door vehicle)

~~~
ceejayoz
You can probably make an argument that "you have to get good ratings"
encompasses all sorts of informal but well-understood job requirements. IIRC,
Uber has recommended all sorts of "tips" for getting good ratings - give a
bottle of water etc. They also set things like minimum acceptance rates for
incoming requests.

 _edit:_ [http://www.businessinsider.com/leaked-charts-show-how-
ubers-...](http://www.businessinsider.com/leaked-charts-show-how-ubers-driver-
rating-system-works-2015-2)

"The most useful part of the Uber guide for its drivers will probably be the
advice on how to maintain a high score. Here's what Uber recommends:"

Offer passengers bottled water, chewing gum, snacks, mints and phone chargers.
Keep your vehicle clean and well-maintained. Dress appropriately. Open the
door. Offer to carry bags. Take the best route. Be nice. Pick up the right
rider. Don't ask for a five-star rating.

