UK Rules Uber Drivers Should Have Certain Employee Protections. What the Latest Ruling Means for Uber & Lyft Drivers?
The independent contractor model needs to be reformed not eliminated. Drivers value their independence, but also don't want to be at the mercy of monopoly algorithms
Britain’s Supreme Court ruled last Friday that a group of drivers should be classified as ‘workers’ entitled to a minimum wage and other basic employee protections. Most of the media covered the topic as though the first domino of many had finally fallen in what would be Uber’s inevitable demise. However, a careful reading and analysis of the details tells a different story. In fact, the ruling is directly comparable to the passage of a minimum wage standard and other protections that have already been implemented in New York City, Seattle and California.
UK Supreme Court Ruling
In 2013, for-hire driver Yaseen Aslam began driving for Uber. Like many, he was making “good money” working for the venture capital-backed e-hail app, but started to notice something troubling. Uber drivers were getting assaulted, especially after picking up drunk customers at pubs, but, according to Aslam, Uber was taking little action.
“Uber wouldn’t share customer details and there was no way for the police to take action. So I was like telling the drivers that ‘look it’s not your job to get assaulted’” - Yaseen Aslam
As Uber began growing rapidly, Aslam started organizing meetings with fellow drivers who were being subjected to reduced fares and bonuses. When he was deactivated from the Uber app in 2015, which Aslam believes related to his activism, he decided to act. He joined fellow driver James Farrar in taking legal action against the Company.
“We organized some meetings at different venues and distributed pamphlets. Uber people would show up at these meetings, mostly to intimidate us” - Yaseen Aslam
In 2015, James Farrar was working at an NGO and driving Uber to support himself when a passenger assaulted him on the job. When the police wanted to investigate the matter, Uber dragged its feet, only cooperating with authorities after 10 weeks.
"I realized I had no rights. Uber has all the control, over the customer details, over how much I can charge, over which passengers I take, but I take all the risks. If I crash, get injured or assaulted, it's all on me. I realized that if Uber didn't cooperate, there's nothing I could do about it…When I went to talk to Uber about why it had taken 10 weeks, they were quite hostile to me. The head of driver operations accused me of trying to record the meeting and then said I was trying to 'reverse engineer the process'. I don't even know what that means." - James Farrar
Compounding this frustration was the fact that Mr. Farrar had calculated he was only making about £5.88 (~$8.20) an hour after expenses.
That equates to £874 a week, but then if you minus 25% commission of £218.50, £270 for the cost of renting a Prius, £100 for fuel and £15 for a carwash, then you are left with £270.50, which works out at £5.88 an hour. (~$8.20) - James Farrar
Aslam’s and Farrar’s experiences, now over 6 years old, were the seeds of the case that ultimately ended up in British Supreme Court, which decided last week that Aslam, Farrar and several other drivers were not self-employed and owed money by Uber.
UK ‘Worker’ Classification
Now that we understand the genesis of the case, let’s clearly lay out what was decided last Friday. The lawsuit against Uber, argued that Aslam, Farrar and several other drivers were not fully self-employed when they worked for the e-hail app giant, but had the right to ‘worker status’. In the UK there are three broad employment categories: employees, self-employed and ‘workers’, a hybrid category that entitles workers to certain benefits, such as paid holiday and minimum wage. The case before the Supreme Court essentially dealt with whether Uber drivers should qualify for the hybrid ‘worker’ category and not be considered fully self-employed. So, to be clear, the ruling was never about whether drivers were full-time employees. The case, at its core, was about ensuring drivers are protected by Britain’s minimum wage standard and other ‘worker’ protections (see below).
The UK Supreme Court decision to rule that the drivers in the case were incorrectly classified as self-employed was based on five issues:
Uber controls how much drivers are remunerated for the work they do, as Uber sets fare prices
Drivers have no autonomy in respect to the contract or terms of service
Drivers are subject to Uber’s control, pursuant to a passenger ratings system, which can result in a driver’s service being discontinued, when delivering services
Drivers are subject to penalties if they decline a certain number of ride requests and therefore are subject to monitoring from Uber
Uber restricts communication between a driver and a passenger and no independent commercial relationship could be formed beyond an individual ride
It’s important to note that the ruling will only initially apply to the 25 drivers who brought the original employment tribunal case. Given Uber changed how its app and service functioned post 2015 it’s unclear whether this ruling will apply retroactively to all its current UK drivers. Given each driver’s claim is said to be worth £12,000 (~$16,700) the ultimate financial cost of the decision could be relatively minor. However, in an absolute worst case scenario, it could get quite expensive if Uber was forced to pay backpay to hundreds of thousands of UK-based drivers.
The UK Ruling Already Happened in NYC, Seattle and California
While its anyone’s best guess to why the media decided to cover this story as they did, this story has already played out in America a few times.
New York City
Given this is a NYC-based publication, most NYC TLC drivers working for Uber or Lyft will know that in 2018 the City passed a new minimum pay standard for drivers. This is extremely similar to what happened in the UK last week. While, it has had a positive impact, the new rules did directly result in Uber and Lyft not accepting any new drivers and led to the creation of a driver scheduler that prioritized full-time drivers (i.e. easier to pay a full-time driver a minimum wage vs a part-timer). For most, especially full-time, existing drivers on the app this was welcome (i.e. they had access), but for other newer drivers they had to join a waitlist or find other jobs.
Following in NYC’s footsteps, Seattle also established a minimum pay rate for rideshare drivers in September 2020. Similar to NYC they’ll likely be benefits, but it wouldn’t surprise me if accessing the apps will be more difficult for newer drivers or those who work part-time. Again, very similar to what happened in the UK recently.
The passage of Prop 22 in California was a big win for Uber and Lyft. However, a simple reading of the bill reveals that it established a minimum wage standard for drivers! Again, very similar to what happened in the UK.
“Under Prop 22, gig workers — including ride-share drivers — will be paid 120 percent of California’s minimum wage of $13 per hour, which increases to $14 per hour in 2021. For ride-share drivers, this applies only during active hours: when they have a passenger in their vehicle or are en route to pick up a passenger. It requires workers with 15 active hours a week to receive a health care stipend.” - The Verge
I will just caveat one thing before I get into my final thoughts and that is the debate on when the “clock” starts. Does the minimum wage “clock” start when a driver is on the app and waiting for a ride, when a driver accepts a ride request or when a driver has a passenger in their car? This, I believe, is the next stage of the debate, but drivers being protected by a minimum wage standard seems to be a rule that will be standardized.
I think independent contractors, whether they work for gig economy companies like Uber or are temporarily hired by a large corporation, should have protections. I agree with the UK ruling, I agree with the driver minimum wage protections in NYC, Seattle and California. However, it is a delicate balance. Ideally, what most drivers, and people in general, want is the best of both worlds. They want to be their own boss, but also have protections and employee benefits. I think that’s reasonable, who wouldn’t want that? I also think most drivers are logical and understand the various tradeoffs, often getting agitated at legitimately unfair situations. For example, a common complaint from drivers is that Uber (or Lyft) deactivates them when a customer complains without hearing their side of the story. I’ve seen this first hand, even to drivers that have thousands of trips and near 5.0 ratings. Given Uber and Lyft’s duopolistic market shares this is a lot of power for them to have. Therefore perhaps there should be law that helps protect drivers from unfair deactivations.
I believe in the future most companies will operate an independent contractor model with the majority of employees being limited to front office "knowledge" workers who are compensated with equity grants and recent graduates. While Uber is demonized, many don't appreciate the work model it helped popularize is in its early adoption phase and will eventually impact "white collar" jobs. Think about the creator economy that has arisen, solopreneurs, etc. For example, will journalists be employed by media companies or will news organizations pick, choose and pay for articles from a pool of popular blogposts written by freelancers? Will small or medium businesses hire digital marketing or development agencies or simply find a qualified independent contractor on a site like Fiverr who’s willing to do the job for 25% less? There are many examples.
Ultimately, if the political pendulum swings too far the other way and Uber or Lyft is forced to classify drivers as full-time employees, tens of thousands of drivers will be out of a job and the drivers that remain will lose the ability to work when and where they want. It’s one of those ‘be careful what you wish for’ situations. This doesn’t mean Uber or Lyft shouldn’t be regulated, but new common sense rules regulating the rise of the independent contractor workforce is what is needed. Let’s all focus on making those rules so drivers feel and are protected, but also don’t lose their ability to operate with flexibility and independently.
Auto Marketplace NYC Newsletter is written by Dawood Mian, Founder & CEO of Auto Marketplace NYC. He covers the NYC for-hire transportation industry and related news. Search Auto Marketplace NYC for cars, parts, tires, technicians, reviews & more. Find great deals at TLCMKT.COM (new site to be launched soon, sign-up to the newsletter if you are interested to learn more ahead of launch)