Uber Drivers to Remain as Independent Contractors: US
Failed class-action by Uber Drivers in the US
Uber, arguably the biggest gig-economy business of recent years (if not the most talked about), had a significant win last week.
About a year ago, Uber drivers in the US undertook a class-action law suit, the premise of which was to be classified as employed workers of the company, not freelancers or ‘contractors’. As employees, drivers would be entitled to statutory benefits like holiday pay & expenses.
Had the case been successful, Uber’s business model was doomed, where operating costs would have hit the ceiling overnight. Plus, a loss would have seen far-reaching implications for other gig-economy companies, given their heavy reliance on contract workers. Silicon Valley waited with bated breath. Twitter was agog at the impending ‘end’ to the on-demand business model.
But *fist punching the air* they won.
Rest assured, Uber’s ‘win’ cost them US$100m. But their drivers will not be classified as employees AND they can’t unionize. And really that US$100m ain’t much… with US$9b of capital raising, Uber’s business model is today, well & truly validated.
What you see here ladies & gentlemen, is a PRECEDENT. The first for the gig-economy. BOOM!
And really, Uber’s win is well-deserved. They were the first company to challenge standard ‘employee’ business models at both a technology AND regulation level. No small fry thinking. And they set the stage for companies like AirBNB, Lyft, Airtasker, TaskRabbit – the list goes on – to transform worker and consumer opportunities: for the worker, better chance of being able to work when, where & how they like. And for the consumer, access to a more affordable service or outcome. This new era of consumption and working offers huge benefits to all involved.
There were some concessions made by Uber with this outcome – they’re to provide more detail to their drivers on their individual ratings and how they compare to their peers; Uber will orchestrate the ability for drivers to get tips (like Lyft); Uber will create a ‘driver’s association’ so drivers can meet regularly & voice concerns (this is not a Union, mind you); and Uber will better explain the circumstances under which a driver is deactivated from using the app. Seems like transparency was an issue here too.
The other caveat is, of course, this settlement can’t prevent any court or authority, from deeming Uber drivers employees at some point in the future. That remains to be seen.
Other winners here? The VC guys who have invested heavily in the on-demand economy. And – no surprise – the on-demand economy itself, and its consumers.
Tell us your view on companies like Uber and others in the gig-economy, in the comments section below. Don’t hold back – we’d love to hear your view!
Follow us @CXCGlobal @CXCGlobal_ANZ