back to article Uber, Lyft struck by sue-ball, no, sue-meteorite in California after insisting their apps' drivers aren't employees

Ride-sharing app makers Uber and Lyft have been hit with a massive lawsuit from the US state of California for failing to recognize their drivers as employees. The Golden State is asking for $2,500 for each violation of its Unfair Competition Law, and up to another $2,500 for violations perpetrated against senior citizens or …

  1. Steve Foster
    WTF?

    Meanwhile (according to the BBC)...

    ..."Uber and Lyft have also pushed Congress to include their drivers in the federal government's coronavirus relief, including expanded unemployment benefits."

    (https://www.bbc.co.uk/news/business-52552998)

    They make Janus look like a paragon of virtue!

    1. HildyJ Silver badge
      FAIL

      Re: Meanwhile (according to the BBC)...

      It's all about the money. The law's major opponents were Uber and Lyft. It was clearly written with gig companies like Uber and Lyft in mind. And it enacts a California Supreme Court ruling.

      Reclassification would cost Uber an estimated $500 million a year.

      At the end of February, Uber said it had approximately $10 Billion in cash.

      But goddess forbid any of that go to their workers.

      1. Robert Grant Silver badge

        Re: Meanwhile (according to the BBC)...

        At the end of February, Uber said it had approximately $10 Billion in cash.

        But goddess forbid any of that go to their workers.

        It does - they're burning through cash extremely fast.

        1. Peter2 Silver badge

          Re: Meanwhile (according to the BBC)...

          It does - they're burning through cash extremely fast.

          Yes. Now there are two possibilities for that. First is that they are as unprofitable and unviable as they claim to be. If that is the case, why are they deliberately offering their service at a price that costs them money? Bankrupting the competition to then shove prices up afterwards is about the only justification that I can think of and that shouldn't be condoned or supported.

          The other possibility is that they are doing an awful lot of creative accounting, which I can't see any reason to condone or support either.

          If you can see a third reason, please do share.

          1. fuzzie

            Re: Meanwhile (according to the BBC)...

            There's a really good and thorough analysis of their business/financial model in this article

            * https://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver-part-one-understanding-ubers-bleak-operating-economics.html#_edn4

            It comes down to the "Get big. Fast" mantra. Use the venture capital to get as large as you possibly can, offer steep discounted rates subsidised by the VC investors. Keep that up long enough, and all the local competition is starved and you're left with the entire market. At which point, prices can be "adjusted" to be more "cost following".

            1. Peter2 Silver badge

              Re: Meanwhile (according to the BBC)...

              That appears to be a less succinct way of expressing "bankrupting the competition to then shove prices up afterwards".

              Of course, if you described it such then i'd be predatory pricing and therefore anti-competitive, and therefore illegal which would mean that the competition people were asleep on the job.

          2. Robert Grant Silver badge

            Re: Meanwhile (according to the BBC)...

            They're land grabbing. Totally agree they're undercutting the competition, but that is different to not paying their workers enough.

      2. fajensen Silver badge

        Re: Meanwhile (according to the BBC)...

        Reclassification would cost Uber an estimated $500 million a year.

        Huh? I thought the purpose of Uber is to flare off as much cash as possible on nothing so it doesn't enter the real economy and causes inflation?

      3. LucreLout Silver badge

        Re: Meanwhile (according to the BBC)...

        At the end of February, Uber said it had approximately $10 Billion in cash.

        But goddess forbid any of that go to their workers.

        That's kind of their point though, isn't it? They don't see the drivers as their workers. Their workers are the tech bros in Cali / elsewhere, not the cabbies in London or wherever.

        If I sign up as an Uber driver I can choose my own hours, choose my own equipment (car, suit/jeans etc), choose my work days, choose who else I work with, choose who else I work for, choose within reason my primary working location - there's a lot there that I can't do in my actual employment at the bank.

        The flip side is that if as a contractor for Uber I choose to work only for them, work regular days, regular hours etc, then yes it starts to more closely resemble a job rather than a contracting gig, however, I chose to make it so, not Uber. Even in the most extreme cases it isn't substantially different to the IT contractor position of insisting they are not employees.

        1. fwthinks

          Re: Meanwhile (according to the BBC)...

          "it isn't substantially different to the IT contractor position of insisting they are not employees"

          That is correct, but IT contractors generally get paid a lot more and financially benefit by not being classed as an employee - while Uber drivers and other gig economy contractors generally get near minimum wage and lose out from being a contractor. So the arguments are identical, but the view is different depending on how much money you make. If Uber drivers were paid a lot more, you would not hear many of them arguing to be considered employees.

          1. LucreLout Silver badge

            Re: Meanwhile (according to the BBC)...

            That is correct, but IT contractors generally get paid a lot more and financially benefit by not being classed as an employee

            And while that may feel important to you, it isn't of the slightest relevance legally. "It's OK your honour, we don't think they're employees and it doesn't matter because we pay them a lot" is not going to work in court.

            while Uber drivers and other gig economy contractors generally get near minimum wage

            Well, yes, but they've chosen an occupation that is very near automatable, to the point that most of the country can do the job. Choosing a low income role instead of a high income one doesn't alter the legal status of the role one iota.

            So the arguments are identical, but the view is different depending on how much money you make.

            No, the arguments are identical. The last bit is emotive again rather than factual.

            If Uber drivers were paid a lot more, you would not hear many of them arguing to be considered employees.

            Most of them don't argue that they're employees - other people argue for them and often against their wishes. I've met some Uber drivers while travelling on business, and none of them wanted to be an employee - I do ask every ride (admittedly I only use 3 or 4 of the things a year). Much the same as my local dial a cab company - none of their drivers are employees and none of them want to be.

            So while I understand that you feel you points should be relevant, they aren't, I'm afraid. Emotion is no substitute for reason, no matter how emotive you are.

  2. bombastic bob Silver badge
    FAIL

    AB5 hurts more than just UBER...

    as I understand it, many businesses are harmed by AB5, ones that you would never GUESS would fall into this kind of category.

    Like professional musicians, playing gigs in bars and clubs [well, when THE STATE IS NOT SHUT DOWN anyway]. These guys who'd normally play for $xxx per gig, suddenly have to be EMPLOYEES? That makes _NO_ sense whatsoever!

    And not to mention I.T. and Engineering contractors and consultants - particularly of the 'work from home' variety. Fortunately I have a CORPORATION so nothing really changed for ME, but I know it has hurt OTHERS.

    AB5 - it's a *STUPID* law, created by *IDIOTS* for the purpose of CONTROLLING that segment of the work force that's existing outside of a LOT of RIDICULOUS REGULATIONS that ONLY empower GUMMINT, at the expense of WORKING STIFFS. It makes CONTRACTORS LESS LIKELY TO BE HIRED, because companies must THINK TWICE before they make people "employees" with all of the usual ADDITIONAL regulations, insurance requirements, taxes, yotta yotta yotta that's associated with it. The unemployment insurance laws REQUIRE THEM to re-imburse the ENTIRE cost of it for up to 6 months after the employee stops working for you. Whereas a CONTRACTOR is TEMPORARY, and there is NO unemployment tax deducted. [in the case of my corporation I end up paying the stupid tax ANYWAY even though i will *NEVER* use it - it's just "yet another gummint expense" and if I ever DID use it I'd have to PAY IT ALL BACK so what's the point???]

    It's what happens when you have ONE PARTY RULE in Sacramento for WAY TOO LONG, and the SOCIALISTS TAKE OVER. It's just a MONEY GRAB and a POWER GRAB, by ELITIST LIBERAL POLITICIANS.

    I'm (holding fingers almost together) *THIS* close to leaving Cali-Fornicate-You for GOOD, over THIS and SEVERAL OTHER THINGS, and thereby DENYING them my business in this state. ONE MORE THING and I'm going to TEXAS!!! Or, maybe, Florida... and if I can take my customers WITH me, that'd be even BETTER!!!

    I'd like to challenge AB5 on its EXISTENCE and MAKE IT GO AWAY. Go, UBER!!! I'm rooting for ya!

    1. This post has been deleted by a moderator

      1. RyokuMas Silver badge
        Facepalm

        Re: AB5 hurts more than just UBER...

        @IGotOut - just sigh and hit that "report post" link...

    2. David Pearce

      Re: AB5 hurts more than just UBER...

      Wrong, your plumber who comes to fix your tap is not your employee because he does not work for you most of the time and is free to do other work

      The ride hailing and food delivery companies forbid working for a rival, provide uniforms and logos. That is a contracted employee.

      1. John Brown (no body) Silver badge

        Re: AB5 hurts more than just UBER...

        "The ride hailing and food delivery companies forbid working for a rival, provide uniforms and logos. That is a contracted employee."

        And if they were truly independent contractors, they would set their own rates for the job to cover things like health and unemployment benefits. The rates that the likes of Uber and Lyft pay their "independent contractors" is barely enough to be able to earn a living wage equivalent to an employee. Uber and L|yft have deliberately set their rates at that level. People working in the new so-called gig economy have no idea what it costs and what they need to earn to actually cover their own costs because they think everything they earn is theirs to keep. Most have no concept of putting money aside for taxes, healthcare the lean times.

    3. Marketing Hack Silver badge
      Alien

      Re: AB5 hurts more than just UBER...

      Is Bombastic Bob actually William Shatner?

      "Bones! Spock! The Romulans are coming through THE nebula! We must DELIVER the vaccine to Rigel 2 on TIME, or they will capture the planet!"

      1. This post has been deleted by a moderator

      2. bombastic bob Silver badge
        Devil

        Re: AB5 hurts more than just UBER...

        I've always liked William Shatner. Thanks for the compliment.

    4. Public Citizen

      Re: AB5 hurts more than just UBER...

      Just in the realm of Musicians and Bands as Gig Economy Enterprises it's an absolute disaster.

      You want to hire a band for your wedding reception? You had better establish a business for that reception so you can legally "hire" a band and any other gig workers, like the Photographer, or the Florist, or the Baker who makes and delivers the cake..........

      The entire law was a fraud perpetrated on the Voters of California by the Public Employee Unions and their Private Sector Collaborators who are loosing membership to the new methods of conducting business, not to mention the lost tax revenue from gig workers who aren't required to file quarterly reports and remittances but just add it all up and write one check at the end of the year.

      El Reg would find it's reporters hard pressed to continue submitting articles if they were located in California.

      The whole law is a massive perversion of governmental authority and it is ~forcing~ people to move out of California in order to continue in their chosen professions as gig workers. If it isn't repealed or thrown out by the courts then it will be one of the contributing factors to the eventual complete collapse of the California Economy.

      1. lglethal Silver badge
        Facepalm

        Re: AB5 hurts more than just UBER...

        I actually laughed out loud at this..

        "El Reg would find it's reporters hard pressed to continue submitting articles if they were located in California."

        Read the byline Citizen "By Kieren McCarthy in San Francisco

        Something tells me he might know a bit more about this then you.

        Plus the rest of your comment is utter bollocks. Unless your planning to have a ton of weddings this year?

      2. bombastic bob Silver badge
        Thumb Up

        Re: AB5 hurts more than just UBER...

        "The whole law is a massive perversion of governmental authority"

        YES!

    5. Anonymous Coward
      Anonymous Coward

      Re: AB5 hurts more than just UBER...

      Please do not feed the troll.

    6. MrDamage

      Re: AB5 hurts more than just UBER...

      Oh Bob. Please go to Florida. From what I've heard of that place, you'll fit right in. We may even see you on the news.

    7. The Nazz Silver badge

      Re: AB5 hurts more than just UBER...

      Out on a limb here, but in and amongst all that CAPS and ranting, Bob does make the odd valid point ie musicians.

      It's just too painful to sort out which is which.

  3. ratfox Silver badge
    Paris Hilton

    Uber and Lyft have yet to show a cent of profit, right?

    And last year, Uber lost 8 billion dollars. Ah well, with the current crisis and everybody staying at home, they should actually lose less money than usual, right?

    1. doublelayer Silver badge

      Re: Uber and Lyft have yet to show a cent of profit, right?

      They'll probably have even higher losses. The only profitable thing they do is to arrange these rides, as they earn more from the customer than they pay the driver. They use all that money, as well as plenty from investors, to pay for projects that don't make any money now but theoretically could in the future, such as their self-driving cars. At this point, they have fewer rides making a small amount of profit, but to the best of my knowledge, they're still paying the engineers on the self-driving project, and they're of course continuing to pay the lawyers and managers. They're going to be even farther from profitable now.

      1. Warm Braw Silver badge

        Re: Uber and Lyft have yet to show a cent of profit, right?

        The last time I checked, they lost money on every ride.

        There was an interesting article about the gig economy companies a few days ago. The thesis is that if they can't profit from the current situation by providing food and other deliveries then there is no time at which they can. Not quite as simple as that, of course, because the cramped sheds from which home-delivery food was being prepared are not ideal for social distancing amongst the staff and you can't deliver from shops that aren't open, but the general argument applies.

        Uber, Lyft, Deliveroo, etc are basically underpants gnomes at the "????" stage. None of the money that has been thrown into the abyss has delivered a sustainable business model. I'd like to say that the smart money says it never will, but it seems to be the people who think they're smart that are content to see their money burn.

        1. lglethal Silver badge
          Go

          Re: Uber and Lyft have yet to show a cent of profit, right?

          Their models is actually quite clear. There plan was always to operate at a loss, and with very low prices until they drove the local taxi operators out of business, and then they could up their prices to profitable levels.

          Its effectively the same as "dumping" on the resources market and is actually illegal under WTO rules, but since where talking a) services and b) local dumping and not international, it doesnt get looked at.

          What seems to have caught them out is how resilient the local taxi firms are, and how they havent managed to wipe them out yet...

          1. Anonymous Coward
            Anonymous Coward

            Re: Uber and Lyft have yet to show a cent of profit, right?

            It was labelled as the 'Amazon Business Model' when I did my MBA. Hated it then and still hate it now.

            It originated with WalMart but Amazon took it to new levels. They also screw their workers. They are sacked on the spot if the complain...

            1. lglethal Silver badge
              Go

              Re: Uber and Lyft have yet to show a cent of profit, right?

              Whilst I'm not a fan of Amazon (or Walmart for that matter), neither one of those operated at a deliberate loss to drive out competition. They might take a loss on certain items, but overall they make a strong profit on most things. They just have lower expenses then the competition (no store front for Amazon/buying in massive bulk for Walmart). Your local supermarket does the same with selling certain items at a loss, its a way to get customers in and spending more money on the things that they make a profit on.

              Uber and Lyft deliberately make a loss in order to drive the competition out of business. Thats a very different business model, and one that definitely shouldnt be condoned!

          2. Warm Braw Silver badge

            Re: Uber and Lyft have yet to show a cent of profit, right?

            how resilient the local taxi firms are

            I think the point is specifically that - that the firms are local. In order to transport you, Uber has to come to your front door, the same door that anyone in the area can put a card through advertising their taxi services. The barrier to market entry is very low and the baseline costs are essentially the same for everyone: Uber can't get its drivers cheaper by buying them in bulk. Its original plan was to eliminate the drivers altogether, of course, but even in the unlikely event of that being feasible technically, the logistics don't look promising.

        2. hoola Bronze badge

          Re: Uber and Lyft have yet to show a cent of profit, right?

          The problem is that the venture capitalist mob who are underwriting these outfits to the tune of billions have left themselves with little option but to continue the money flow. If they don't, then it folds and the lose everything. If they continue there is a remote possibility that all the competition will run out of money before the VC mob do.

          At that point they have a license to print money. Of course the over-valuations etc that have evolved on the back of this take us back to the DotCom bubble. The very same people will have been involved then and still have not learnt, mainly because they are all greedy sods.

          1. ratfox Silver badge
            Angel

            Re: Uber and Lyft have yet to show a cent of profit, right?

            the venture capitalist mob who are underwriting these outfits to the tune of billions have left themselves with little option but to continue the money flow. If they don't, then it folds and the lose everything

            That's the sunk cost fallacy! But actually, the VC mob got its money back when Uber went public. Now it's private investors who would be left holding the bag.

          2. John Brown (no body) Silver badge

            Re: Uber and Lyft have yet to show a cent of profit, right?

            "At that point they have a license to print money."

            True. For about 5 minutes. As others have mentioned, the bar is very low for Private Hire and only a little higher for Taxis. If Uber/Lyft manage to wipe out the competition by undercutting them, as soon as they raise prices to start paying of their $billions of debt, Joe Bloggs and co will be back out on the road as small independents, undercutting Uber and Lyft. Uber and Lyft are then back at square one, running ata loss to undercut the new disrupters.

  4. croc

    Contracting...

    Back in the late 1980's I was contracted to Exxon's IT department in Houston. The assignment was ended by a federal law that was passed declaring that if a contractor spent more than x % of their time working for one company in a given year then they were assumed to be de facto employees of said company. While I grumbled over that at the time, (as did many contracting agencies) looking back I think it was a fair call and should probably still be the rule of thumb for determining contracting / employee status.

    1. Pier Reviewer

      Re: Contracting...

      The Cali law has some similar features to IR35 in Blighty. The differences in how the two are perceived is a little surprising tbh.

      1. MiguelC Silver badge

        Re: Contracting...

        Except that in this case if a contractor is reclassified as an employee, they gain all employee benefits (as well as obligations). Unlike IR35.

      2. ExampleOne

        Re: Contracting...

        If IR35 gave the "contractor" the rights of an employee, along with the tax implications, it wouldn't be so bitterly unpopular.

        There is also a difference in intent: In the UK the intention is to effectively force all the contractors into employee relationships (this doesn't prevent short term contracts). In Cali it is to effectively force the employers to offer employee relationships.

      3. The Nazz Silver badge

        Re: Contracting...

        I don't know the details, but i'd gladly wager that such as IT contractors, on the whole, pay a considerable amount of tax to HMRC ( even if that is less than they would as employees) whereas the poor Uber and Lyft drivers most likely can pay no contributions to the IRS out of their minimal income, net of car costs etc.

  5. Cuddles Silver badge

    It really doesn't

    “Sometimes it takes a pandemic to shake us into realizing what that really means and who suffers the consequences,”

    People have been pointing out the issues with the likes of Uber for as long as they have existed. And as the article notes, this specific law was passed well before anyone had heard of Covid-19. No-one has been paying any attention at all needed a pandemic to make them realise anything here.

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