Let me begin by saying I rarely use Uber. Still, I know an Uber car and driver when I see them—which is precisely the problem for Uber these days, and probably for many more companies before much longer.
I speak of the California Labor Commission’s decision earlier this month that, yes, an Uber driver is an employee of Uber. The ride-hailing company had been sued by an ex-driver in San Diego, who said she worked long hours with no support from Uber to cover her expenses. Uber argued that the woman wasn’t actually an employee, because Uber doesn’t employ drivers. Rather, it is a technology company that only puts drivers in touch with customers. So the driver in question was really an independent contractor, Uber argued, responsible for her own costs.
The public is curious about this Uber ruling because it raises questions about the future of work, when the future of work for so many of us looks kinda crappy. Compliance officers, however, have a more urgent interest here because the ruling also raises questions about where corporate culture begins and ends, and how we treat people like Uber drivers who work at the edge of that line.
First are some straightforward regulatory compliance issues about what makes you an independent contractor. That’s the good news. The IRS publishes a set of 11 questions to ask about the employer-worker relationship that get to the issue of control: financial, behavioral, and practical. The more control the business exerts over the worker, the more that person qualifies as an employee rather than a contractor.
On those grounds alone, Uber has some difficult questions to answer but isn’t entirely defenseless. Yes, it exerts control over the equipment a driver uses (you can only drive certain car models, and Uber must approve any new vehicle you want to use), and over the price that drivers can charge. On the other hand, Uber doesn’t set the hours you need to work, or where you work, or closely review the quality of your work. (Quality control runs on auto-pilot; customers rate a driver’s performance, and if your rating falls below 4.6 on a 5-point scale, Uber stops sending you customers.)
The California Labor Commission ruled against Uber based on a decision from 1991, when taxi drivers had sued to be considered employees of a taxi company. Back then, the Commission ruled that the drivers were definitely employees, because “their work is the basis for [the cab company’s] business.” The same is true of Uber drivers today, the Commission said, so the driver who sued is indeed an employee.
Uber has promised to appeal that ruling in court, and it applies only to that specific driver rather than all Uber drivers as a class. But as I mentioned earlier, the Labor Commission ruling also raises some pointed questions about the future of work that could get quite awkward for executives who oversee corporate culture—like, say, ethics & compliance officers.
The real problem is this: Uber, and many other companies, wants to reduce financial responsibility for workers by using outdated, exacting legal standards that place risks and costs back onto the worker. Here in the real world, however, human beings don’t like that idea. If a company want to reap the benefits of a stellar corporate brand and reputation, you need good employee conduct, and the company needs to take responsibility for getting it.
In Uber’s case, taking responsibility means providing better financial compensation for the challenges of being an Uber driver. For example, if a customer schedules a ride and then no-shows, Uber can charge the customer a cancellation fee—or Uber can waive the fee if it chooses, but the driver isn’t entitled to that fee income even though he or she suffered lost time and revenue. Plenty of drivers believe that if it weren’t for them setting a better standard than ordinary taxi drivers, Uber wouldn’t have the $50 billion valuation it does. They’re right.
So when Uber says the collective conduct of its drivers, and the culture Uber fosters, is what sets it apart from competitors—it’s politically and socially tone deaf then to say that all those individuals are actually independent agents just using an Uber app and on the hook for their own expenses. Uber may well find that the argument is legally tone deaf too, before all is done.
You can see a similar dynamic at “joint employers” such as McDonalds, where the National Labor Relations Board declared last year that because it gets so many complaints from workers at McDonalds franchisees, the NLRB will include the McDonalds corporation in cases its pursues against individual franchisees. Different business structure, same question: At what point is a company exerting so much control over culture and brand value, that it must shoulder more employer responsibility as well?
In that 1991 decision, the California Labor Commission laid out this logic: “Even though there is an absence of control over the details, an employee-employer relationship will be found if [the company] retains pervasive control over the operation as a whole.” Uber, McDonalds, and other businesses certainly do relinquish lots of control over the details. The question is whether—as we all keep pushing for higher standards of conduct, to enhance corporate reputation and brand—“pervasive control over the operation as a whole” should extend to corporate culture; lots of workers would say yes.
Something to think about next time you’re sitting in the back seat.
Comment on this post on LinkedIn.