Tag Archives: peer to peer economy

That in which I contemplate the effects of punching or getting punched in an Uber!

Uber provides a service by which people who need a ride can just log into the Uber application on their phones, and request a ride. This application pairs them with drivers who happen to be in the area, and are available to give them a ride. Uber receives a credit card payment from the customer, most of which is given to the driver.  This has been described as technology that has revolutionized how we see the taxi service.[1] Someone with a mobile phone and the right app, can call a cab. And anyone with a car, the app, and driving skills/ licence, can be a driver (at least that is how it started out). They can use their phone to pay the driver, as well as rate them. This has given Uber great success, and it has even become the face of peer to peer economy (along with Air BnB). Uber has encouraged this narrative of peer-to-peer economy

Peer to peer economy (or a sharing economy) is one in which an owner is not using something, they rent the thing out, with the help of a technology that gets the buyer and seller (or a renter and leaser) together. This company charges a fee for this. The company (Uber in this case) says that it is not an employer, but a facilitator of micro-entrepreneurs. It does not pay for overheads like fuel, insurance, vehicle maintenance, and neither does it cover liability for any accident on the job. Why would it? It is not an employer. According to Lyft (a company that has a similar modus operandi), the drivers are really doing a service for the passenger, and ‘Lyft is a by-stander of sorts, analogous to e-bay’[2].

But there is just one problem in this narrative. This practice of companies that are employers claiming that they are not employers is age-old. It is done to get over the hurdles of paying benefits to their workers, and covering on-the-job accidents. Consider this case reported in the Forbes magazine. Omar, an Uber driver in Los Angeles took his passengers to their apartments at 2:30 AM at night. Two of the passengers beat this driver up, and he ended up being admitted to the hospital.  [3] This, however, is not an isolated incident. This same newspaper reports multiple incidents of cars being stolen and drivers being assaulted. The problem is, given the narrative of the company being a ‘facilitator’ and not an employer, these workers cannot get any assistance from Uber.  While we shall be dealing with the legal issue in subsequent paragraph just think of what this means. It is the idea that a man working at the behest of a Corporation (valued at billions of dollars), and getting hurt on the job, is not paid a dime of assistance. Does this not militate against the idea of fairness?

However, Uber’s problems don’t end here. Uber has been publicizing the idea that it can be an avenue for creating jobs for women. In fact it aims to create 1 million jobs for women. (It is difficult to understand how one can create jobs without being an employer, but okay, I guess they plan to facilitate a million entrepreneurs). Despite their admirable goals, the fact remains that if there is a case of sexual assault on any of their drivers in the course of work, Uber claims no responsibility to compensate the victim. UN Women, which had earlier decided to partner with Uber in this project, has now dissociated itself, citing concerns with sexual assault on women. [4] Interestingly, Uber got a lot of bad press in India, when, after a rape case involving an Uber driver and a passenger (who was the victim), it was shown that Uber did not even conduct background checks on its drivers. [5] In fairness to Uber, they have now started to put more stringent checks in place in India. Also here is a detailed description of the background check procedure that Uber follows. But there is also a very real loophole in the legal framework. What happens to a female driver who gets sexually assaulted? Does Uber take responsibility to provide compensation? If they say they are not employers, then NO. Similarly, there is no clarity on Uber’s liability to pay compensation to passengers who get assaulted in the vehicle.  I am not suggesting that an Uber ride is less safe than other taxis. That may not be the case, but certainly the legal position on compensation in case of injury in the cab is not clear.

As far as the employer-or-not issue is concerned, now there are Uber and Lyft employees that have decided that they are not buying the by-standers positions, and the two companies face a class action lawsuit that could possibly change the topography of the peer-to-peer economy. These employees in the USA claim that though they are classified as independent contractors, they are actually employees and the companies owe them reimbursement for overheads, and compensation for injuries on the job. This is something that concerns employment lawyers everywhere, so really this case is worth following.

The legal defense of Uber, and a seemingly solid one, can be summed up in the words of an attorney with the Employment Law Group, “They don’t have to show up to work on Monday at 9 a.m. if they don’t want to…What they’re not understanding is that this lack of control — where they can have a two-hour lunch if they want, or no lunch at all — that freedom comes at the price of if they’re in an accident, the company doesn’t have to pay.”  [6]

At the moment, things seem to be going in favor of the complainants. Uber’s request for summary judgment, and a declaration that its drivers were independent contractors was rejected by the District Court. The matter is now going to Trial before a jury. One strong argument in favor of the drivers is the economic realities test.This test does not only focus on the level of supervision involved in a job, but also the extent to which employees depend on the existence of the business in question. Some of the factors that are considered to determine ‘economic realities’ are mentioned under the Fair Labor Standards Act. [7]   These are as follows:

  • The extent to which the work performed is an integral part of the employer’s business: This is a factor that goes in favor of the drivers, because Uber or Lyft would not have any utility without the service provided by the drivers.
  • Whether worker’s managerial skills affect his opportunity for profit or loss. Given that Uber assigns the passenger to the driver, whose job is to take said passenger to the pre-determined destination, it can hardly be said that this job requires managerial skills.
  • The relative investment in the equipment and facilities by the worker and the employer. In this case the drivers made a pretty significant investment of their car and fuel money. However, I would argue that it is not at all comparable to the investment made by Uber in running and developing the application.
  • The worker’s skill and initiative. To show that a person is an independent contractor, it must be shown that he or she exercises independent business judgment. That does not seem to be the case here.
  • The permanency of the relationship between the worker and the employer. Permanency suggests that a worker is an employee, and this is one factor that strongly goes against the drivers. They do have the independence to stop working for Uber anytime they desire, or not work whenever they feel like it.
  • The nature and degree of control by the employer. Like the preceding factor, this one also goes against the drivers, given that there is a very limited degree of control exercised over the drivers by Uber.

Given that none of these factors are dispositive, there is a chance that the drivers may win the lawsuit against Uber. But one must stop and ask the question, are mis-characterization lawsuits (i.e the one’s where you claim that the workers have been characterized wrongly) really the way to go here? If the employees do win this lawsuit, and end up owing huge sums of money to the workers, what impact will it have on the long term health of the peer to peer economy?  And is it really a good idea to try and fit a revolutionary new concept into old tired methods of classification of labor? This does not mean that Uber and Lyft should continue with their unfettered business model. There is a very strong need for regulation, but there is also a need to understand that shared economies are sui generis, and old methods may not work on them. Perhaps new laws can be enacted that place a burden on these companies to take liability for injuries or accidents at the workplace, but not reimburse for overheads? The drivers could be given some sort of quasi-employee status, so that the regulation does not ultimately kill this new method. There must also be some framework of compensation for people who get hurt or sexually assaulted during their cab rides.

I would also like to ask whether there is a possibility for the unionization of Uber and Lyft drivers. What would this relationship be like? What kind of bargaining power would the union have, given that there crowd-sourcing makes the supply of drivers willing to do the job on the terms of Uber inelastic. Further, can unions play a significant role in the dynamic, changing relationships that the drivers and Uber have at the moment? Only time will tell.

[1] http://www.bloombergview.com/articles/2014-06-12/don-t-stop-the-uber-revolution

[2] http://uberlawsuit.com/Time.pdf

[3] http://www.forbes.com/sites/ellenhuet/2015/01/06/workers-compensation-uber-drivers-sharing-economy/

[4] http://www.theguardian.com/technology/2015/mar/23/united-nations-uber-womens-safety

[5] http://www.reuters.com/article/2014/12/11/us-uber-india-courts-idUSKBN0JP18T20141211

[6] http://www.forbes.com/sites/ellenhuet/2015/01/06/workers-compensation-uber-drivers-sharing-economy/

[7] http://www.dol.gov/whd/regs/compliance/whdfs13.htm

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