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Last week, California lawmakers passed AB 5, a bill that is supposed to upset the business models of large economy firms like Uber and Lyft, which rely on the inexpensive and relatively unregulated labor of subcontracted labor. Experts predict that the law could cost Uber $ 500 million more per year in annual operating costs if it eventually forces the company to reclassify its workers into employees, who would then be eligible for minimum wage, health care and overtime protection.
But Uber and Lyft say they're not worried. In fact, the two companies that go by car say that the new law does not force them to make the costly change of converting their drivers into employees. This is why they will have to consider drivers as part of their "usual course" of work. Uber said its drivers were not apps because the app is really a technology platform for "digital markets" and not primarily an employer of drivers.
Working Groups and Politicians Bubble over Uber's argument. In interviews with Recode, they said they saw this as another way for Uber and Lyft (who also said they did not change anything) to try not to provide basic protection for their hundreds of thousands of people. drivers in California.
"They cling like a child and say," We refuse to change, "said Veena Dubal, a law professor at Hastings University who is doing research on the show's economy."[Uber’s chief legal officer] Tony West at some level probably realizes how absurd it is, but that's the line they've adopted, and they have to be consistent with that. "
Uber refused to extend his legal reasoning on Recode, but has already advanced this argument. It looks pretty much like this: Uber's core business is providing technology that connects people to each other. Drivers are free to accept or refuse trips as they please. They are therefore not employees of Uber, but customers of his market, just like the people who drive them.
Despite the disturbing appearances of Uber and Lyft, the stakes are important for both companies. The political battle around AB 5 comes at the same time that Uber and Lyft have struggled since the beginning of the stock market. Two weeks ago, the shares of the two companies were trading at their lowest level. And meanwhile, both companies are bleeding money: Uber lost more than $ 5.2 billion in the last quarter and Lyft lost nearly $ 650 million.
The two giants met with politicians, the governor and union leaders to try to negotiate on AB 5, and launched aggressive campaigns against the bill (which, according to some drivers, were misleading), which threatened the drivers with losing the ability to work flexible hours if they have actually become employees. A few weeks ago, Uber, Lyft and DoorDash announced that they would inject $ 90 million into a 2020 California voting initiative that would directly encourage voters to cancel legislation.
So, does Uber have a case where he says that his drivers are not an essential part of his business? Or is it simply to delay the inevitable regulation that will fundamentally change its activity and aggravate its financial difficulties?
Several experts in labor law and law told Recode that Uber's AB 5 defense would not work. However, even if the argument does not stand up in the courts, it is a wise political decision to buy time because society is facing public pressure on its work practices.
"If nothing else succeeds – whether or not it passes the odor test – it saves them time and gives them leverage," said Bradley Tusk, one of the first Uber investors and regulatory advisor who have worked with the company in the past. "If you say," Yes, we will sue Uber, "it could take three, four, [or] five years to take place. "
The upcoming legal challenge
Regardless of the timeline, Uber and Lyft are facing a difficult legal battle against AB 5.
"[Uber and Lyft] say – which is ridiculous – that they look more like Craigslist, that they provide a meeting place for buyers and sellers, "said Rebecca Givan, professor of labor relations at Rutgers University. "But in fact, they set prices, what car you can use, all kinds of things. They no longer look like Craigslist; they are an employer, "she said.
Shannon Liss-Riordan, a prominent labor lawyer who has been fighting Uber since 2015 to avoid employee misclassification, has already filed a class action lawsuit against Uber for classifying drivers as workers rather than employees. , and in particular requested an injunction that would force Uber to immediately reclassify its workforce.
"Uber and other market economy companies are laughing at the law and refusing to do so," said Liss-Riordan. "We therefore ask the court to immediately require these companies to reclassify their drivers."
And, thanks to a last-minute addition of lawmakers, city and state attorneys can also sue Uber and Lyft for failing to follow AB 5's classification rules. City Attorney San Francisco's Dennis Herrera said he was ready to do so.
But these new legal threats are only part of the challenges of this type for Uber and Lyft, both of which have been the subject of class action suits against drivers for their work practices. (As Tony West, of Uber, said in a recent press call, "Uber is no stranger to legal battles.") So far, some precedents suggest that the case Uber's is not totally absurd, at least on the basis of several arbitration rulings, a type of private court often used by companies to resolve labor disputes.
In a 2018 case specifically mentioned by Uber, an arbitrator ruled that an Uber driver was not entitled to employee compensation and benefits.
"Uber did not specifically provide rides, nor does a broker provide goods," wrote the referee in his decision. "Instead, she only exposed (although it is very effective) the possibility that a rider finds a driver willing to drive, and that he finds a rider willing to drive. The distinction is material. "
Uber noted in its S-1 report in April that it faced more than 60,000 driver arbitration cases for job classification issues. Since decisions on these cases are largely private, it is difficult to say whether there is a real legal consensus or whether Uber has chosen to highlight some success stories.
But in the decisions of the public courts, the judges were less than supportive of Uber. A California judge said in 2015 that Uber's argument that drivers were not a central part of his business "undermined credulity", and another in New York expressed similar skepticism , according to the New York Times.
Whatever the way the courts decide, whether for or against Uber and Lyft, this legal battle could be long. And it gives a lot of time for lobbyists to do politics in the meantime.
Why this can be a bold political move
Although Uber's argument is not ultimately winning, it is strategic in the short term.
"I think that from a political and practical point of view, Uber's path is smart, "said Tusk. "While [Uber] at the end of the day, we risk losing in court by saying that our drivers are not part of our normal business. They could thus avoid having to face this problem for a few years, while the course of their actions really suffers. More importantly, I think it gives them the power to reopen the legislation negotiations with California politicians. "
Tusk openly criticized Uber CEO Dara Khosrowshahi, who has taken a more cautious approach to managing the company, compared to the former CEO's "act first and ask for forgiveness later" strategy and founder, Travis Kalanick. (Kalanick resigned in 2017 under pressure from investors.)
"This is the first time we've seen Uber be aggressive for some time," Tusk said. "I'm happy to see this side of society come out for once."
Meanwhile, Uber and Lyft are actively trying to work with politicians and labor groups to draft follow-up legislation that would cancel or amend AB 5 by giving drivers some protections, such as the right to bargain collectively (although not necessarily as a union), and a minimum wage, in exchange for not being considered employees. This is in addition to the $ 90 million initiative that companies fund with DoorDash, which they call a last resort if companies can not enter into a legislative contract with politicians.
It makes sense that Uber is showing off his teeth again – though part of this strategy downplays the potential impact of AB 5. The law should change the deal for Uber and Lyft, as well as for the future. other market economy companies such as DoorDash and Postmates. . This could enable millions of workers from all sectors (and not just the application-based market economy applications) to obtain the benefits they claim to have been victims of for years, and the Previously created ones could spread to other states closely monitoring California's leadership. on labor rights.
If companies like Uber and Lyft are forced to treat hundreds of thousands of workers as full-time employees, they will have to do the opposite of what their investors want. Instead of reducing labor costs, companies will have to radically add to these expenses as they try to become profitable. This could explain why Uber pushes the limits of reason to avoid a radical restructuring of his economic model.
Uber's bold argument against AB 5 could also have the effect of alienating union leaders, politicians and the general public, particularly at a time when the company is attempting to alienate the union. enhance its favorability and regain the trust of its customers the scandals that tarnished its past.
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