Uber Doesn't Think Its Drivers Are a Core Part of Its Business
The company seemed to flout a California bill that could totally overhaul its contractor workforce.
By Alison Durkee
By David Paul Morris/Bloomberg/Getty Images.
The California legislature passed a major workers' rights bill Wednesday, which will require employers to classify workers as employees instead of contractors if they pass certain requirements. But as one of the most high-profile companies to be affected by the new rule, Uber isn't prepared to play along. In a statement released after AB5's passage, Uber's Chief Legal Officer Tony West said the company is confident their drivers will be able to escape the restrictive new policy, because they don't consider the drivers—seemingly the single most important contributors to Uber's ride-sharing service—to be doing work that's within the company's "usual course." "Under [AB5's] three-part test, arguably the highest bar is that a company must prove that contractors are doing work 'outside the usual course' of its business," West said. "But just because the test is hard does not mean we will not be able to pass it. In fact, several previous rulings have found that drivers' work is outside the usual course of Uber's business, which is serving as a technology platform for several different types of digital marketplaces."
West emphasized in his statement that Uber "continue[s] to believe drivers are properly classified as independent," and noted that the new regulations, which California Governor Gavin Newsom is expected to sign into law, will "not automatically reclassify any ride-share drivers from independent contractors to employees." Uber has long railed against the idea of considering its drivers as employees, arguing that doing so "would fundamentally change what Uber and ridesharing is." The company has suggested that classifying drivers as employees would result in getting rid of the flexibility that Uber's current business model allows, forcing set shifts on drivers, hiring fewer drivers, and prohibiting them from working in areas or during hours that are particularly low-demand. (California Labor Federation spokesman Steve Smith described this scenario as a "corporate scare tactic" to ABC10, saying that nothing in the labor code would forbid flexibility.) But California legislators have so far refused to listen to Uber's protestations, rejecting a proposed compromise and adding extra enforcement provisions directly after West told Assemblywoman Lorena Gonzalez, the bill's author, that Uber wouldn't reclassify its workforce and would mount a legal challenge. "I thought a lot about that conversation and thought how unfair it is for any company in California to sit in a legislator's office and say we don't care what you do, we're going to break the law," Gonzalez said in a news conference after the bill's passage.
Uber, of course, isn't the only company who will be affected by the potential law, which would take effect in January 2020 and could grant additional rights to at least one million contracted workers. Though some professions have been exempted from the measure, such as doctors, insurance agents, and real estate agents, concerns have also been raised about contractors ranging from religious leaders to newspaper delivery workers. And Uber's tech competitors, including Lyft, DoorDash, and Instacart, also aren't thrilled about the legislation—though, unlike Uber, none have yet brazenly announced themselves to be above its demands. "Today, our state's political leadership missed an opportunity to support the overwhelming majority of rideshare drivers who want a thoughtful solution that balances flexibility with an earnings standard and benefits," Lyft spokesman Adrian Durbin said in a statement, while an Instacart statement said the bill "missed the mark." "We remain committed to working with the Governor, legislators, labor advocates, and the voters of California towards a better solution for all Californians," the company's statement said.
Should Uber's current confidence not pan out, reclassifying their California workforce would be the latest financial blow to the already-weakened tech company, which is still reeling after their "train wreck" IPO in May. The company's second quarter earnings marked Uber's largest-ever loss, and the company slashed its workforce by 8% in a new round of layoffs earlier this week. Of course, there still could be hope: Newsom said Wednesday that there are still "ongoing negotiations" with Uber and Lyft about a potential deal, and the ride-sharing companies are currently bankrolling a potential ballot measure asking Californians to support added benefits for ride-share drivers while retaining the flexibility of their contractor designation. But the fact that Uber's lobbying efforts weren't enough to stop AB5 is a failure in itself. "Hopefully they'll frame the narrative better and be more proactive as new states take up the issue," regulatory adviser Bradley Tusk told CNN, saying that Uber took "a passive, slow approach to AB5 and it hurt them." "[But the fact] that these companies could not avert this bill through their lobbying and power reveals that their goodwill among the public and politicians has eroded."
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