Last Updated on August 25, 2020 by Mike Dean
Irrespective of the outcome of the current legal spat with California, Uber CEO Dara Khosrowshahi admitted that his company could not employ all of California’s drivers as ordered by the state judge.
The Uber executive stated in the Pivot School podcast interview that it is impossible to hire so many drivers overnight. This comment is the current development in the drama between California and the popular ridesharing company.
On 10th August, the state succeeded with an initial injunction against Lyft and Uber. Ethan Schulman ordered these two companies, a Superior Court Judge of California, to comply with the state’s Assembly Bill 5 labor law. He dismissed Khosrowshahi’s argument that Uber is a technology-based platform, and hence, drivers are not fundamental to the business.
Schulman wrote the obvious, in response to Uber’s statement, saying drivers are not tangential but fundamental to Uber’s ride-hailing business. According to the legislation, some contractual workers are to be reclassified as employees. Both Lyft and Uber retorted that they would have to temporarily suspend their operations and retool their current businesses in case the court supports the injunction.
In an MSNBC interview, Khosrowshahi admitted that Uber would have to shut down. However, it also mentioned that the shutdown would not be permanent since it would be only till the next votes take place on Proposition 22. He added, saying that Uber does not want to be excluded from California. It is mostly like to take time to figure out how to sustain in this state.
Uber confirmed the reports that the company might consider other models, such as the franchise system, that would invite more operators in California.
Nonetheless, Khosrowshahi said that Uber would restrict the number of drivers working on Uber’s platform and increase its customers’ fare once it finally relaunches in California. He estimated that around 80 percent of Uber drivers who log into the application only 5 to 10 times a week would lose the ability to earn on this platform. He also predicted the trip fares, especially in the dense urban hubs such as San Francisco, would rise to almost 20 percent while the rates would go higher in less dense, smaller cities.
The interview revealed the core position of Uber in the economy. The company undeniably helped in creating both the sharing economies and the gig. It popularized the idea that someone could earn added income by renting his car. But these services become extremely professionalized where the drivers want to work for a steady income. This was not always possible due to Uber’s algorithmic subjugation.
Uber is not a sustainable business model. It has never proved to be profitable because it has only been losing money every quarter. Moreover, the company has been accused of worsening the situation of income inequality many a time in the past by supporting a system that employs independent contractors without eligibility for the conventional employee benefits.
Galloway, a marketing professor at the NYU Stern School of Business, wanted to know Uber’s opinion on income inequality. He noted the wide gap between the regular employees of Uber who earn more than 6-digit salaries and the non-Uber drivers who mostly live under the existing poverty line.
Uber’s CEO rejected Galloway’s remark by calling it a false statement since the couriers and drivers working on this platform are not employees per se. They work whenever they want to since Uber is extremely flexible in terms of working hours.
According to Uber’s critics, nothing can stop Uber from sustaining this market, allowing its drivers to work with flexibility, which they set on their schedule under Assembly Bill 5 labor law. However, uber has denied this statement since there is not a single company in California that allows employees to set their working hours.
Through a ballot measure, Uber has put forward a way whereby the company will classify drivers as their independent contractors, sidestepping Assembly Bill 5 and also, provide some extra benefits such as access to minimum wage and health insurance.
Along with DoorDash and Lyft, Uber has promised to spend at least $100 million while driver groups with the support of unions only have about $ 866,000 to petition against it.
Vanessa Bain, Gig Workers Collective’s co-founder, said to Galloway and Swisher before Khosrowshahi’s interview that this would outspend them by exorbitant proportions. She added that the company does not have enough resources or capital to be spent on what Uber is spending to get Proposition 22 passed.
Swisher’s idea stated that an additional driver representative of Uber’s board would help the company’s drivers have a better chance of making the company responsible. Khosrowshahi agreed to Swisher’s idea was promising by citing some German companies who have employee representatives on boards. However, he also mentioned that it would be possible in other sectors, not here.
Khosrowshahi added that the company’s system is optimized, and it is a part of capitalism, not labor-ism or socialism. Every capitalistic system aims at maximizing capital as well as shareholder value. This being the sole input, you will end up obtaining the same outcome. Hence, these types of systems are bound to change and that he is ready to level up the company with systemic changes.
Lyft and Uber are expected to submit statements by 4th September 2020 along with the implementation plans that comply with the Californian law within 30 days in case the court supports the previous injunction order. The oral arguments have been scheduled for 13th October 2020.
If the workers are reclassified, it will imply a radical movement forced on these two businesses. Both Lyft and Uber will have to develop enormous driver fleets and make them independent contractors. If the drivers work as independent contractors, they would not be entitled to various benefits such as overtime pay, minimum wage, paid leaves, unemployment insurance, and worker’s compensation.
Mike (Dean) Gumora is the founder and owner of Ridesharreport.com. I’m also the first official rideshare driver in the industry vetted by the first Rideshare/TNC startup, Sidecar in 2011. I have completed hundreds of trips and deliveries for companies such as Uber, Lyft, Uber Eats, DoorDash and Postmates. My hands-on industry experience in rideshare began in 2011. The rideshare industry is my passion. I have followed and studied the industry since 2012. But, my real passion is supporting the ever-growing community of drivers and riders.