Uber announced Wednesday it plans to spend an additional $250 million on “boosted incentives and guarantees” to persuade drivers to get back on the road amid a shortage during the COVID-19 pandemic.
“In 2020, many drivers stopped driving because they couldn’t count on getting enough trips to make it worth their time. In 2021, there are more riders requesting trips than there are drivers available to give them-making it a great time to be a driver,” Dennis Cinelli, the head of Uber’s US and Canada ride-hailing business, said in a blog post.
But Uber also warned the increased pay won’t last forever.
“We want drivers to take advantage of higher earnings now because this is likely a temporary situation. As the recovery continues, we expect more drivers will be hitting the road, which means that over time earnings will come back to pre-Covid levels,” Cinelli said.
Uber claimed in the blog post drivers in Philadelphia, Chicago, Austin, Miami, and Phoenix are currently earning pre-tip median incomes between roughly $26 and $31 per hour.
But during the pandemic, many ride-hailing and food delivery drivers have seen their pay dramatically increase, due to the way Uber’s business model works.
Uber’s ability to provide on-demand rides at low prices depends on having lots of drivers active when passengers are looking for a ride. If only one driver is competing for a passenger, that driver can refuse the job until Uber’s algorithm jacks up the pay – which is esssentially what some DoorDash drivers are doing to boost their pay for food-delivery gigs.
If 100 drivers are competing for that same job, Uber can offer much lower pay and one of them will still probably do it, and therefore Uber can charge the consumer less and still make more money itself.
But the pandemic caused a massive drop in the demand for rides, and has kept many drivers – who are especially concerned about getting sick because Uber doesn’t provide healthcare or sick pay – off the road, even as rider demand returns.
That’s a bad situation for Uber, which doesn’t want riders returning to the app only to find no drivers are online and that they’re waiting 20 minutes for a ride and still paying surge pricing.
So, Uber is effectively bribing drivers to get back on the platform until there’s enough competing for those returning passengers that Uber can start whittling down driver pay again.
In late 2019, California lawmakers passed AB-5, hoping to make it harder for companies like Uber to skirt labor laws and offload healthcare and unemployment insurance costs to taxpayers by misclassifying workers as contractors.
But Uber refused to comply, arguing that AB-5 didn’t apply to its drivers because they aren’t core to its business and that drivers really are independent because they’re “free from the control and direction” of Uber.
In an attempt to prove its independence argument, in January 2020, Uber gave California drivers more control by allowing them to set their own prices for rides and see passengers’ destinations before picking them up.
Regulators and courts didn’t buy it. But fortunately for Uber, a $200 million PR campaign around Proposition 22 successfully persuaded California voters to exempt it from AB-5, saving the company as much as $500 million per year, according to a 2019 estimate by Barclays analysts.
Now that Uber no longer needs to convince California authorities that its drivers are independent, the company plans to reclaim control, revoking the price-setting and passenger destination features it gave drivers barely a year ago, the San Francisco Chronicle reported Monday.
Uber’s reason for the reversal?
Too many drivers took advantage of the control Uber gave them, picking the most profitable rides while declining others, making it harder for customers to get rides and hurting Uber’s business, the company said. According to the Chronicle, one-third of drivers turned down 80% of rides.
Industry observers said the move is hardly surprising but it undermines Uber’s claim that the changes were ever about anything more than dodging regulation.
Uber did not respond to a request for comment on this story.
“It really shouldn’t be a shock to anyone,” Harry Campbell, who runs The Rideshare Guy, a popular blog among drivers, told Insider. “Since they passed Prop 22… there’s nothing holding them accountable for these changes.”
Campbell said that drivers likely won’t be happy given the popularity of the price-setting and passenger destination features, but added, “It’s kind of, unfortunately, a bit of a pattern that Uber specifically often gives drivers some things that they want and then ends up taking them away.”
“Is there a single Prop 22 promise that Uber hasn’t broken?’ Gig Workers Rising, which advocates on behalf of ride-hailing and food delivery drivers, tweeted in response to the Chronicle’s reporting, alluding to Uber’s history of misleading claims during its Prop 22 campaign.
But by revoking some driver-friendly features, Uber – which has yet to turn a profit – also revealed some of its post-pandemic priorities.
Companies like Uber and Lyft rely on flooding the market with drivers, who then face pressure to accept lower-paying rides and risk another driver getting the job or getting penalized themselves for turning down too many rides, even if those rides are unprofitable.
But during the pandemic, there has been a massive shortage of Uber and Lyft drivers, due to a drop in demand for rides and a concern among drivers about getting sick (the companies don’t provide healthcare or sick pay). And even as rider demand returns, many drivers are still staying home.
With fewer drivers on the road and Uber drivers able to freely reject unprofitable rides, they’re driving up their wages. That means higher prices and longer wait times for passengers, which Uber isn’t happy about.
“The companies, strangely, they care more about reliability than profitability at this moment in time,” Campbell said. “They want to make sure that the platform is working like everyone expects and if drivers are ignoring 80% of requests, that means that it literally is going to take longer for you to get matched with a driver.”
Campbell said Uber, Lyft, DoorDash, and other platforms are offering huge incentives to drivers – like a $250 bonus for completing 20 rides – as they struggle to get them back on the road.
As with past promises, those incentives and other driver-friendly features could just as easily disappear if the market becomes saturated with drivers again and companies regain the upper hand, but Campbell said that there needs to be a middle ground.
“If Uber is going to be able to get away with paying drivers like independent contractors, I think that’s kind of some of the control that they have to give up and find a way to make work.”
An independent arbitrator on Thursday ordered Uber to pay $1.1 million to a blind passenger for illegally discriminating against her after its drivers refused her rides on 14 occasions.
The arbitrator also rejected Uber’s argument it wasn’t liable for discrimination by its drivers because they’re contractors.
Uber said it strongly disagreed with the ruling.
Lisa Irving, a San Francisco Bay Area resident who is blind and relies on her seeing-eye dog, Bernie, to help her get around, brought the claim against Uber in 2018 after “she was either denied a ride altogether or harassed by Uber drivers not wanting to transport her with her guide dog,” according to the arbitrator’s ruling.
Uber drivers left Irving stranded late at night, caused her to be late to work (which eventually contributed to her getting fired), and on two occasions, verbally abused and intimidated her – and that the discrimination didn’t stop even after she complained to Uber, her lawyers told Insider in a statement.
“Of all Americans who should be liberated by the rideshare revolution, the blind and visually impaired are among those who stand to benefit the most. However, the track record of major rideshare services has been spotty at best and openly discriminatory at worst,” Catherine Cabalo, one of Irving’s attorneys, said in the statement.
“The bottom line is that under the Americans with Disabilities Act, a guide dog should be able to go anywhere that a blind person can go,” Cabalo added.
“We are proud Uber’s technology has helped people who are blind locate and obtain rides. Drivers using the Uber app are expected to serve riders with service animals and comply with accessibility and other laws, and we regularly provide education to drivers on that responsibility. Our dedicated team looks into each complaint and takes appropriate action,” Uber spokesperson Andrew Hasbun told Insider in a statement.
But the arbitrator found Uber employees who investigated possible incidents of discrimination were “trained … to coach drivers to find non-discriminatory reasons for ride denials” and even to “‘advocate’ to keep drivers on the platform despite discrimination complaints.”
Under the Americans with Disabilities Act, it’s illegal for transportation businesses that are subject to the law to refuse to transport people with guide dogs, but Uber tried to shift the blame to its drivers, arguing it wasn’t responsible for any ADA violations because its drivers are independent contractors.
The arbitrator disagreed, ruling Uber was also liable for ADA violations because of its “contractual supervision over its drivers and for its failure to prevent discrimination by properly training its workers.”
However, classifying drivers as contractors is a strategy that has allowed Uber to avoid legal liability in other contexts, such as when a pedestrian alleged that she nearly lost her leg after being struck by an Uber.
The strategy has also allowed Uber to avoid paying drivers’ health insurance, sick pay, and unemployment insurance, shifting those costs to taxpayers – who paid $80 million last year to keep Uber and Lyft drivers afloat during the pandemic, making the companies one of the largest beneficiaries of a subsidy program aimed at small businesses.
Uber, Lyft, and other ride-hailing and food delivery companies have aggressively fought efforts in multiple states and countries to reclassify drivers as employees, which would add significant additional costs to their already unprofitable business models. Earlier this week, UK-based food delivery company Deliveroo’s initial public offering tanked by 30% after investors expressed concerned about how it had exploited its drivers.
Back in 2019, I predicted that California Assembly Bill 5 (AB5), which upset the independent contractor world by reclassifying freelancers in hundreds of occupations as employees unless they could prove they’re not, would be seen by other lawmakers as a road map, rather than a cautionary tale. And here we are: a new bill working its way through Congress, the Protecting the Right to Organize Act of 2021 – or PRO Act – should give independent contractors across the country reason to worry, though not necessarily because of the intent of the legislation.
The ABC test
What made AB5 so problematic was its reliance on the ABC employment test to classify workers. ABC says a freelancer should be an employee, unless:
“A) The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
B) The worker performs work that is outside the usual course of the hiring entity’s business; and
C) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”
The worker must meet all three. Part B is where many independent contractors went through the buzzsaw: If you’re in the same business as a client, you must be an employee, and, presumably the company would hire you, even if you’ve only been putting in a few hours a week for them. Yet, instead, most employers are just not working with California freelancers anymore.
ABC is also the basis for reclassification in the PRO Act, which passed the House of Representatives earlier this month with bipartisan support. However, there’s one big difference: While AB5 reclassified employment status for workers in California, the PRO Act reclassifies freelancers nationally, but only for the purpose of collective bargaining rights. That’s all – or so it states. Supporters say it “levels the playing field” for unions, to give more people the right to vote in union elections.
I spoke with Professor Michael LeRoy, an expert in labor law and labor relations at the University of Illinois Urbana-Champaign, to find out whether freelancers should worry about the PRO Act. He said there’s been some hyperbole and misunderstanding about it.
“Does [the PRO Act] force you to be in a union? No. If 10 million [freelancers] are classified as employees, a certain amount will want to form one or join one, but they could also vote no,” he told me.
I’d be okay with more people being able to collectively bargain if they want. Freelancers I spoke with aren’t apoplectic about theoretical pressure to join a union, either. What does concern us greatly is the ABC test being used to reclassify independent contractors for any reason. Almost everyone I spoke with feared the ABC test would be misapplied by companies who read the reclassification part of the law, but miss the part about unions. Freelancers also worry that the ABC test will set a precedent for future legislation. It already has: Several states used AB5 as a model when proposing new “gig worker protection laws.”
Fred Topel, a Los Angeles-based entertainment journalist and co-leader of California Freelance Writers United (CAFWU), implored national lawmakers to not use the ABC test. “If you take out the ABC test, I think a majority of [CAFWU] members would support it. We’ve seen no evidence that AB5 worked as lawmakers intended, but plenty of evidence of unintended negative consequences from the ABC test,” he said.
Robert Sette, a freelance translator in Denver, predicted that any big change to labor laws using the ABC test would make hiring companies think twice about using independent contractors. “Many won’t see [the PRO Act] as only for labor organizing. They’ll see this as a risk management issue. To avoid possibly running afoul of the law, they’ll cut loose freelancers.”
That did happen in California. The Facebook group Freelancers Against AB5 has been compiling personal stories of independent contractors in California who lost work and income directly as a result of that law, well before the COVID-19 crisis. Based on dozens of “no Californians need apply” notices citing AB5 as the reason, it appears that many companies were so bewildered by the law and scared of fines for possibly violating it, they simply gave up on California independent contractors.
The road to career hell was paved with good intentions
After AB5 passed, I joined CAFWU and other advocates in California to petition state representatives to amend the law. We succeeded in getting exemptions for some professions.
Through the process, we learned that most lawmakers had no clue about the scope of the independent contractor world, and assumed most people deriving an income were either employers, employees, or exploited would-be employees. The bill’s biggest proponents said, in so many words: Don’t worry if you lose work because all your clients will hire you full time, with benefits! We explained that’s not how it works, emphasizing that most independent contractors are thriving professionals.
I recognize that some independent contractors do want full-time work, and that many other workers are truly misclassified and exploited. There should be protections from misclassification, except – there already are laws covering that. Any worker can sue for misclassification right now – albeit with difficulty.
We don’t need new laws that help some, but also legislate hundreds of thousands of successful careers out of existence. LeRoy agreed the ABC test is a blunt tool that “oversimplifies” the labor force and would need “significant refinements” and exemptions if kept in place. A potential solution could be a multi-factor balancing framework to determine who’s an employee, one like the IRS uses.
In order to prevent the ABC test from wreaking havoc on more independent contractors’ lives, constituents must start conversations with their representatives, starting with the Senate subcommittee members that will be discussing it. They could point to surveys showing that 30% of the US workforce is either self-employed or hired by the self-employed and estimates that freelance income is nearly 5% of GDP.
Stripping the ABC test from the PRO Act could prevent lawmakers from proposing more damaging bills, like the one written last year by Democratic Senators Patty Murray of Washington and Sherrod Brown of Ohio. Their bill gives some benefits to temp and gig workers, but, like AB5, it uses the ABC test to sweep all professions into its net.
This shouldn’t be a partisan issue, but sadly it is. Many Republicans insist any labor protections will hurt business and therefore can never be considered. Based on comments from AB5’s proponents, many Democrats assume what’s good for unions surely benefits everyone. Labor classifications must be more nuanced than that because today’s labor market is complicated.
Pro-labor lawmakers need to understand that freelancers are not necessarily suffering gig workers, or getting by until they land a “real job.” They should either toughen enforcement of existing laws or make sure new laws explicitly help workers who need protections, but not hinder independent contractors’ ability to earn a living. Labor law shouldn’t be a zero sum game.
Uber and Lyft then asked the court to toss the case, arguing the state hadn’t done enough to prove drivers were denied benefits and that there wasn’t a legitimate legal dispute over the issue. The court denied both companies’ requests, allowing the case to proceed.
Uber and Lyft did not respond to requests for comment on this story, while labor and driver groups praised the ruling.
“This court order is a complete rejection of Uber and Lyft’s position and a big win for working people,” Massachusetts AFL-CIO president Steve Tolman told Insider in a statement.
“Every worker should be able to earn a decent wage, take care of their health, and protect against harassment and discrimination on the job. We thank Attorney General Healey and her team for holding Uber and Lyft accountable for following the same rules that apply to every other company,” Tolman added.
The two ride-hailing giants have faced an increasing number of legal challenges in recent years over how they classify workers amid growing evidence many drivers are paid less than the minimum wage, and have struggled – particularly during the pandemic – without access to health care, labor protections, and unemployment benefits guaranteed by law to employees.
While companies are typically required to pay into state and federal programs benefiting their workers, Uber and Lyft have passed those costs on to taxpayers. A recent Washington Post analysis found more than 27,000 Uber and Lyft drivers received a combined $80 million from the US government to help them get through the pandemic.
The companies have argued drivers should be considered contractors because they’re able to choose when they can work and which rides they accept, claiming the companies are simply technology platforms that connect drivers and riders.
But a UK court recently rejected that argument, finding Uber and Lyft exercise significant control over drivers – much like a traditional employer – by setting their rates, assigning them rides, and using a rating system to determine their ability to get work on the platform. Uber responded by reclassifying its drivers as “workers,” a category under UK law between employment and contractor, in order to head off further legal disputes with drivers.
California regulators and courts also rejected the arguments put forth by Uber and Lyft, but the companies – along with a coalition of food-delivery companies including DoorDash and Instacart – avoided having to comply with those rulings by spending a combined $200 million to persuade voters to pass a law they wrote that keeps drivers as contractors.
The Biden administration’s proposed PRO Act, which wouldn’t automatically reclassify gig workers but would make it easier for them to unionize, has elevated the discussion around which rights and benefits rideshare and food-delivery workers should have – and who should bear those costs.
District attorneys typically serve citizens by building legal cases against people accused of crimes, but one prosecutor in Bucks County, Pennsylvania, got demoted this week for serving residents food – as a DoorDash delivery driver.
Gregg Shore, who had been second-in-command at the Bucks County district attorney’s office, got caught driving for the food delivery service during hours he was supposed to be doing his job as a prosecutor, KYW Radio reported Thursday.
In 2019, Shore earned $125,435 – roughly $60 per hour – as first assistant district attorney, according to public records.
DoorDash CEO Tony Xu told The New York Times that delivery workers earned an average of just $17 per hour in 2018 – but the company doesn’t pay for the time workers spend waiting to claim orders, and some drivers say the base pay can be as little as $3 per hour.
Shore told KYW Radio that his reasons for working for DoorDash were personal and that he drove mostly at night.
“What he did was indefensible, thoughtless, selfish, and so stupid, it’s senseless,” Bucks County district attorney Matt Weintraub said in a press conference Thursday.
“I don’t know why he did this, only he has the answer, and I’ll admit to you that I’m very angry and I’m upset… this is the reason for his demotion,” he added.
Weintraub said Shore will be demoted to deputy district attorney, adding that while it would be “easier and politically expedient” to fire Shore, it “was not necessarily the right thing to do” given Shore’s otherwise positive track record.
Jennifer Schorn, who had been chief of the office’s trials and grand jury divisions, has been promoted to first assistant to fill Shore’s role, Weintraub said.
But delivery workers haven’t seen the same benefit, and have long complained about low pay, tough working conditions, and even wage theft – DoorDash paid $2.5 million to settle a lawsuit that accused the food delivery company of stealing drivers’ tips.
Amazon agreed last month to pay some of its contract delivery drivers in Washington state $8.2 million to settle a class-action wage-theft lawsuit, reported earlier on Friday by Vice News and confirmed by Insider.
The lawsuit, originally filed by two Amazon delivery drivers in 2017, had alleged Amazon was partly to blame for illegally failing to pay drivers the minimum wage and denying them compensation for overtime and rest breaks.
The drivers, Gus Ortiz and Mark Fredley, worked for Amazon delivery service partner Jungle Trux – one of a sprawling network of contractors Amazon uses in part to reduce its legal liability and labor costs.
Ortiz and Fredley alleged Amazon imposed delivery quotas of 150 to 200 packages per day, forcing drivers to skip legally mandated rest breaks and work past their 10-hour shifts to complete the routes, and that Jungle Trux failed to pay them for those extra hours.
The settlement, first reported on Friday, covers drivers who worked for eight Amazon delivery service partners (DSPs) in Washington state between December 2014 and July 2020: Dash Delivery, Delivery Force, A‐1 Express Delivery Service (doing business as 1‐800 Courier), Progistics Distribution, Revelation Delivery, Genesis Delivery, and Transportation Brokerage Specialists.
“Amazon does not tolerate violations of labor laws. Where we find repeated violations, or an inability to correct labor violations, we terminate contracts with DSP program participants,” Amazon spokesperson Leah Seay told Insider in a statement.
But the company has faced a number of legal challenges from drivers employed by its DSP network.
California regulators fined Amazon $6.4 million for wage-theft violations earlier this month concerning former Amazon contractor Green Messengers. Amazon told Insider it was “not aware of the investigation” and is appealing the fine.
Amazon is also facing class-action lawsuits over wage-theft allegations in Colorado, Florida, Illinois, Kansas, Maryland, Minnesota, Missouri, Ohio, Texas, and Washington state, according to Vice’s analysis of court records.