Uber: D-Day for Dara… and John

My wife and I disagree. My wife thinks Uber provides a valuable and often inexpensive alternative to taxis – plain and simple. I see something more sinister in spite of the fact that I have used Uber everywhere from China to Brazil to Germany and the U.K. The one through line to its operations in all these locations has been flouting laws and regulations and under-compensating drivers.

I am not comfortable with that operating ethos – particularly in the midst of a pandemic. My wife proofread my blog (below) and did not come around to my point of view. In spite of that non-endorsement I felt a need to publish.

Once again Uber leadership has shown its true colors in its response to the potential adoption of AB5 legislation in California. The legislation now in effect introduces the onerous concept of gig operators having to treat their drivers as employees. Horrors.

In reaction to enforcement actions taken by the state and a judge’s ruling August 10th, both Uber and Lyft announced their intentions to suspend their services in California beginning August 21 – one day after the judge’s ruling compelling them to treat drivers as employees is to go into effect.

Both organizations have appealed the ruling which might result in a further enforcement delay. Failing such a delay, there is a referendum called Proposition 22 on the ballot Nov. 3rd intended to preserve gig operations more or less as they stand today. The bottom line is that Uber and Lyft do not intend to comply with AB5.

The threat to shut down in the face of regulatory sanction is a familiar one for Uber. In New York City and London Uber “waved the bloody shirt” suggesting that regulators were hurling thousands of drivers out of gainful employment with their sanctions or rules. (Uber and Lyft were forced to leave Austin, Tex., for a time until lobbyists could do their work in the state legislature.) Of course, there are always transportation alternatives and opportunities for drivers and passengers alike, rendering such threats meaningless.

The larger issue is that Uber, from its inception, has been a lawless disruptor, determined to undermine or avoid regulations – especially those requiring the company to treat drivers as employees. (Privacy is another not-so-sacrosanct sector for Uber.) Regulators are mainly concerned that drivers are adequately compensated and that they have the protections normally accorded employees – including healthcare and unemployment benefits. Further, if Uber and Lyft drivers were employees they would be seen as and see themselves as representatives of their employers.

If Uber or Lyft were to comply with AB5, the two companies maintain, their business model would be devastated – requiring them to employ far fewer drivers and significantly reduce the scope of their operations. Both of these realities suggest that the two companies are built on unsound models and business assumptions dependent, as they appear to be, on lax oversight and under-compensating their “employees.”

The irony is that both Uber and Lyft flourish under a banner of flexibility. Their drivers can work when they wish or not as they please. 

Both Uber and Lyft must manage their driver compensation to ensure a sufficient number of available drivers to meet variable demand. By now, both companies have a multi-year history of managing supply and demand while mitigating driver churn. This means that both companies are ideally positioned to institute and manage an operating environment where drivers are actually employees, rather than “employees.” They already have a good feel for historical patterns of demand useful for building a service around employees, instead of contractors.

But no. Both companies are married to their laissez-faire operational ethos which means that neither company can guarantee any particular level of quality of service either in the timing or availability of rides or in the quality of the customer care during those rides.

This is an especially noxious environment for service delivery during a pandemic when drivers – and passengers – may or may not consistently mask themselves in the confined space of an Uber vehicle. Neither Uber nor Lyft have taken steps to supply or require in-vehicle partitions.

Uber and Lyft may yet wiggle their way out of compliance with AB5 in California. In fact, AB5 may well be a horrible law unworthy of adoption – though it is already in effect.

But rather than comply with the law and seek to simultaneously minimize its impact on service delivery for both drivers and passengers and seek its withdrawal or modification through legislative means, Uber and Lyft choose instead to “tear the baby in half” if they can’t have their way. Both companies would rather suspend service than comply.

For Uber and Lyft drivers, it isn’t enough that neither of these operators offer unemployment or healthcare insurance; it isn’t enough that average compensation for drivers has declined steadily year after year; it isn’t enough that not enough has been done to protect drivers and passengers from the coronavirus. On top of all this, Uber and Lyft would rather suspend operations than to treat drivers as full-time employees with relevant rights, benefits, and protections.

(One of Uber’s favored rebuttals is that its own drivers are not interested in being employees. They prefer working as contractors. Unfortunately, the public interest is best served by a regulated service staffed with protected and properly compensated employees. (It’s worth noting that Uber is able to operate in cooperation with existing taxi companies in multiple jurisdictions around the world. A report in the NYTimes suggests a similar path may open in California: 

https://www.nytimes.com/2020/08/18/technology/uber-lyft-franchise-california.html)

One might driver enthusiasm for Uber by arguing that there are no bad jobs – especially during a pandemic with double-digit unemployment. If there are people willing to do a particular job, then that is endorsement enough and the state is not obliged to protect those people from themselves, from under-compensation, from lack of coverage.

In this time of coronavirus, Uber and Lyft may feel the sacrifice of a California suspension of service is worth the lost revenue – especially given the greatly reduced volume of ride hailing activity during the pandemic. If healthcare workers are willing to treat COVID patients at their own risk; if meat packing plant workers feel economically compelled to do their jobs; if auto workers are obliged by existing contracts to show up at crowded plants; if agricultural workers are driven to harvest crops while enduring dangerously crowded living conditions; is it that much to ask Uber and Lyft drivers to endure sub-minimum wages without protections?

Yes. Yes, it is too much to ask. Uber and Lyft drivers are not only essential workers, they are at risk. And the environment within which they operate is dangerous. Like healthcare workers, and meat-packing plant workers, and auto workers, and agricultural workers, and law enforcement, and transit workers, Uber and Lyft drivers are entitled to and ought to be treated as full-time employees with appropriate protections and benefits. Anything less is criminal.

My wife doesn’t agree.