Earlier this month, the capital cities of several European countries were brought to a standstill by protests. The crowds – and the rows of parked cars that accompanied them– were part of a concerted effort from London to Madrid, from Berlin to Paris, to cause disruption and get attention. This wasn’t a political protest, however. Those taking part were taxi drivers, and their target was clear: Uber, the ride-sharing app that’s challenging the way cab services operate.
Uber insists that it provides a safer, cheaper alternative to a somewhat stagnant industry, and continues to expand the countries in which it operates.
For those who don’t know, Uber was founded in 2009 in California. The smartphone app connects passengers with Uber-approved drivers as part of a ridesharing program. The idea is simple: rather than booking a taxi, individuals can send a text message, or use the Uber app, to reserve a car, track its location, and pay for the service. From its beginnings in San Francisco, Uber has exploded, and its popularity with techies and urban business workers means that Uber now operates in 39 countries.
The protests – and the company’s ongoing problems with regulators – stem from the fact that Uber drivers often circumnavigate taxicab licensing procedures. That’s something that traditional cab companies claim offers an unfair, and illegal, advantage. As one London cab driver recently told NPR:
"Other drivers it takes three, four years [to pass the London cab driver test]. All depends how hard you work at it. If you want to be a taxi driver, then do the same as what I've done. It's hard for two years. You go without things. You have to sacrifice things in your life. But if you want to be a taxi driver, this is the best taxi service in the world."
A taxi driver from Madrid added that:
"After three years, I bought my license for 137,000 euros ($185,400). It's more than my house! So I need work, and I have to work 16 hours a day to do it."
It’s easy to see the problem, but not the solution. Uber insists that it provides a safer, cheaper alternative to a somewhat stagnant industry, and continues to expand the countries in which it operates.
That hasn’t stopped the lawsuits, though. Interestingly, the most recent legal challenge comes from Uber’s own drivers, rather than the government or Uber’s competitors. The suit was filed in Boston’s Suffolk County Superior Court and alleges that Uber misclassifies its drivers as independent contractors, rather than employees, to avoid paying benefits. The suit also claims that the company fails to pay the entirety of gratuities given by passengers, in violation of Massachusetts tip laws.
The suit was filed on behalf of plaintiff Hakan Yucesory, but seeks class action status on behalf of all affected Uber drivers. According to the suit, Uber drivers provide the core function of the business and therefore deserve to be treated as full-time employees, with the associated benefits and protections guaranteed by federal law. By failing to do so, Uber is potentially violating the Fair Labor Standards Act. Sadly, employee misclassification is nothing new, and every year dozens of companies are accused of using misclassification to get around paying overtime wages, health benefits, and other costs.
In related news, a separate lawsuit filed in California federal court last year sought to protect Uber drivers’ right to receive tips and reimbursement for expenses. As part of the case, the presiding judge ruled that drivers should be given the option to opt-out of the company’s arbitration clause – wording in Uber’s licensing agreement that prevents drivers from taking part in the potential class action lawsuit. Uberlawsuit.com puts it this way:
“The court agreed with the plaintiffs’ argument that the arbitration clause could undermine drivers’ ability to participate in this class action and ordered that Uber provide ‘corrective notice’ about the arbitration clause.“
That’s another good step for Uber drivers. Arbitration agreements always favor companies and their increasing use is controversial enough.
So, what next for Uber? Every new company faces teething problems, especially when they aim to disrupt an industry that’s seen little change in the last few decades. Still, innovative or not, no business can afford to misclassify workers or fail to comply with state and federal laws. Uber needs to walk a fine line between building the future and repeating the mistakes of the past.