Uber Model Alive and Well after Settlement
Late last week, Uber announced it had settled two class action lawsuits brought by drivers claiming, among other things, that the ride sharing service was violating the labor law by classifying drivers as independent contractors. For those of you with either a direct or indirect stake in the taxi industry through the financing of medallions, the settlement of these lawsuits is another blow. Here’s why.
The Uber model is based fundamentally on the assumption that the company is nothing more or less than the provider of an App that enables individuals in need of a ride with those willing to provide one. In Uber’s view of the world, ride sharing allows the mom on the way to the store to make a few extra dollars by taking Sally down the street along for the ride. Under this best case scenario, our mom is an independent contractor picking and choosing what rides to take as she makes her way through her busy day.
To critics of Uber and other ride sharing services, the mom is not so much an independent contractor as a poorly paid employee. For instance, under Uber’s model drivers who consistently turn down rides can be dropped from the service and each ride comes with a suggested price and gratuity.
If the critics are correct, the Uber model is illegal and the traditional taxi medallion model is alive and well. This is why the settlement is such a big deal. Uber agreed to pay drivers up to $100 million and end its practice of automatically removing drivers who refuse too many rides. At the same time, the drivers will continue to be classified as independent contractors in Massachusetts and California.
Uber is by no means out of the woods. Similar lawsuits are still pending. And just last week California’s Commissioner of Labor ruled that an Uber driver was an employee rather than an independent contractor. But this ruling is being appeal and is not binding on anyone beyond the employee involved.
While the settlement of the Massachusetts and California cases leaves the independent contractor issue undecided, in my ever so humble opinion, anyone looking for the courts to provide a silver bullet, at least in the near future, when it comes to regulation of ride sharing businesses is likely to be disappointed. For those of you who feel that the system should be better regulated in order to put medallion taxi and ridesharing service on an equal footing, the places to look for relief are State legislatures.