Uber and Lyft could be avoiding a combined $153 million in taxes every year in Canada, according to a new report from the nonprofit Canadians for Tax Fairness (C4TF).
The report estimated Uber and Lyft avoid $53.9 million in corporate taxes as well as $81.3 million in unemployment insurance and benefits taxes by taking advantage of lax financial disclosure requirements around corporate taxes, in addition to classifying drivers as contractors.
While not illegal, the tactics let Uber and Lyft benefit from taxpayer-funded programs like roads, pensions, and unemployment insurance, despite paying very little into those programs, C4TF argued.
“Uber and Lyft both depend to a huge degree on publicly funded infrastructure to make their revenues, but they provide very little of the funding for that infrastructure because they pay next to nothing in taxes,” DT Cochrane, the report’s author and a policy researcher at C4TF, told Insider.
While the lack of transparency around corporate taxes makes it impossible to know exactly how much the companies paid, he added: “it’s doubtful that it approaches the level that we think that it should.”
Uber and Lyft told Insider they disputed the report’s findings, and said they have paid all taxes required by Canadian law.
“Uber contributes millions of dollars in the form of ridesharing fees, which help local and provincial governments pay for ridesharing, transit, and other initiatives,” an Uber Canada spokesperson told Insider.
“We file all of our taxes in Canada, including federal and provincial corporate income tax, payroll taxes, GST/HST, QST and applicable provincial sales tax,” a Lyft spokesperson told Insider, adding that the company “is in good standing with the Canadian tax authorities.”
But C4TF’s report cited several ways it says Uber and Lyft may have been able to significantly cut their tax bills.
First, C4TF estimated the companies brought in $203 million in combined profit in Canada in 2019, which should amount to $53.9 million in federal and provincial corporate taxes. Neither company discloses how much they pay in Canadian corporate taxes, but according to C4TF, using Uber’s global average effective tax rate of 1.9%, Uber and Lyft would have paid roughly $8.6 million.
Multinational corporations have come under increasing scrutiny for attempting to lower their global tax bills by routing profits through low-tax countries. An Australian research group accused Uber of using Dutch shell companies to turn $5.8 billion in global revenue into $4.8 billion in losses on paper, allegedly sidestepping millions of dollars in taxes.
Until recently, Uber’s Canada subsidiary was owned by its Dutch subsidiary, which C4TF claimed may have let it avoid Canadian taxes as well by booking Canadian revenue in the Netherlands where corporate taxes are lower (Uber claimed it had discussed plans to spin off its Canadian subsidiary as early as 2018).
In response, C4TF argued Canadian authorities should require more transparency from companies like Uber and Lyft to ensure they are paying their full tax bill.
C4TF’s report also estimated Uber and Lyft avoid $81.3 million in unemployment insurance and pension taxes by classifying drivers as contractors – a growing source of legal and political headaches for the companies in the US, the UK, Spain, and other countries. In a ruling last year, Canada’s Supreme Court opened the door for a class-action lawsuit that could chip away at the companies’ ability to classify drivers there as contractors.
Lyft’s spokesperson told Insider the Canadian government “recognizes drivers on Lyft as independent contractors and assigns taxes accordingly.”
One such tax includes Canada’s sales taxes. Because Canadian law requires individual contractors to collect and pay sales tax (except in Quebec, where the contracting company is responsible), C4TF argued Uber and Lyft drivers are unfairly shouldering those costs.
C4TF also claimed that because Uber and Lyft don’t withhold those sales taxes – an estimated $217 million per year – from drivers’ earnings upfront, they’re overstating how much drivers are really making.
Cochrane told Insider the report was also a critique of Canadian authorities that do not hold companies accountable for paying their fair share.
“We don’t know exactly what [Uber and Lyft’s] bookings are, what their revenue is, what their take rate is, what their profit margin might be, what their taxes paid are simply because the Canadian government is falling behind on requiring greater corporate transparency,” he said.
The Cyberspace Administration of China said Sunday on its website that the investigation found the Didi app “has serious violations of laws and regulations” in both collecting and using personal information. App stores were notified to remove Didi and “strictly follow the legal requirements.” The statement did not say what kind of information was allegedly being unlawfully collected or used.
Didi said in a statement posted on Weibo that it would comply and make necessary changes. Registration of new users has been suspended and the app “will be removed from the shelves for rectification in strict accordance with the requirements of the relevant departments,” the statement said.
Users who have downloaded the Didi App can use it normally, and passengers’ travel and driver’s orders will not be affected, the statement said.
Didi is the second-largest ride-hailing app by market value in the world with a valuation of about $86 billion. Uber currently has a valuation of about $93 billion, while Lyft trades at a $20 billion valuation.
Shares of Didi soared as much as 28% in its IPO debut in New York on Wednesday. The company’s debut was the second-largest among Chinese companies after e-commerce giant Alibaba’s initial public offering in 2014.
Didi sports a number of high-profile investors, including Apple, which invested $1 billion in the ride-hailing company in 2016. Meanwhile, the SoftBank Vision Fund holds a 21.5% stake in Didi, while Uber and Tencent own a 12.8% and 6.8% stake in the company, respectively, according to Bloomberg.
Uber and Lyft could face nearly 1,000 individual lawsuits claiming that drivers sexually assaulted and harassed passengers, lawyers at firm Levin Simes Abrams told KPIX Wednesday.
The San Francisco-based law firm recently filed 85 lawsuits against Uber, mostly in San Francisco County Superior Court, with 321 cases pending, and filed more than 20 lawsuits against Lyft, with 517 cases pending, lawyers told KPIX.
About one third of those cases represented California residents, firm partners Rachel Abrams and Laurel Simes also told KRON in a separate interview on Wednesday.
Abrams and Simes told KRON that the 85 cases filed against Uber would not be joined together in a class-action lawsuit, because the details and severity of each case varied significantly.
The lawyers told KRON that hundreds of women came forward with claims of sexual assault and harassment after the firm took on its first case against Uber in 2019. In some cases, the women claimed drivers assaulted them when they were asleep or intoxicated, the lawyers said.
Firm attorney Meghan McCormick told KPIX in an interview that some drivers stand accused of ending rides early on the app “so it looks to anybody watching, or to Uber, as if they did exactly what they’re supposed to do.” They then drive the passenger “to a deserted place,” she said.
Abrams told KPIX that 99% of assaults “would be prevented if there was a camera.”
In 2019, Uber released its first safety report, which said there had been 3,045 sexual assault reports on its US platform, out of 2.3 billion trips, between 2017 and 2018.
Uber said in a statement to KRON: “We remain steadfast in our commitment to support victims and help stop sexual violence by collaborating with experts, pioneering safety tech solutions, and setting the standard on transparency and accountability.”
Uber, Lyft, and Levin Simes Abrams did not immediately respond to Insider’s request for comment.
Chinese ride-hailing company Didi has already become a retail-trader favorite in its first day on the public markets, Bloomberg first reported.
According to data from Fidelity, Didi shares ranked number one among retail traders Wednesday, while Exela Technologies, which has seen heightened interest from Reddit investors this week, was second, and well-known meme-stock AMC Entertainment was third.
Didi had more than 32,000 buy orders as of 3:15 p.m. in New York, compared to Exela and AMC, which each had about a third of that, the data showed.
Didi’s debut is the second largest among Chinese companies, after e-commerce giant Alibaba’s initial public offering in 2014. The shares soared as much as 28% in their first day of trading, giving Didi an approximate $86 billion valuation, Markets Insider reported.
The valuation makes Didi the second largest ride-hailing app in the world after Uber, which is valued at $93 billion.
Rumors about a potential IPO spread for several years before the company eventually filed its prospectus earlier this month, Fortune reported. Among Didi’s largest shareholders are investment firm SoftBank, which has a 21.5% stake, Uber, which has a 12.8% stake, and Tencent, which has a 6.8% stake, Fortune said.
I tried The Drivers Cooperative, a new ride-share app available in New York City. Unlike Uber, Lyft, and other ride-hailing companies, drivers own and have control over The Drivers Cooperative.
The Drivers Cooperative launched in opposition to high commissions Uber and Lyft take from drivers, according to the app’s website. The company hopes to provide drivers with higher wages in the short-term and a “just, green transition of the industry” in the long-term.
To sign up, I downloaded the app and plugged in personal information like my name and phone number. The process to sign up was easy and I was ready to start ordering cars within a few minutes.
I first tried to find a driver to pick me up in Queens.
Before I ordered the car, The Drivers Cooperative had a breakdown of the fees and where exactly my money went. I noticed the price was slightly more expensive than what I’d pay for a similar trip on Uber and Lyft, but still pretty comparable.
Unfortunately there weren’t enough cars in the area, so it took about 10 minutes to find a driver. And when the app had selected a driver, the car ended up going the wrong way and I had to cancel.
But The Drivers Cooperative acknowledged that the company was just starting and there might be “bumps in the road” as it acquires more users. I decided to try again in Manhattan, where I figured there’d be more cars.
Getting a car in Manhattan took about a minute or two. The driver arrived within five minutes.
My driver, Tarsem Singh, said he was not part of the group of drivers who founded the app – but enjoys The Drivers Cooperative more than Uber and Lyft.
Singh said Uber and Lyft do not listen to drivers. When he drove for Uber, he said a teenage passenger complained about him going too slow. In reality, Singh said he went the speed limit and the passenger wanted him to go faster.
Uber suspended his account after the passenger complained about him. Singh said he tried to appeal his suspension but failed.
Singh said he’s been happy with the passengers using The Drivers Cooperative. He said he urges New Yorkers to use this app because it “gives drivers much more money.”
Despite some hurdles I faced in ordering a car, I’d encourage more people to use the app. The cost is similar enough to Uber and Lyft, and I feel better knowing my money is helping keep Singh and other drivers happily employed.
In 2014, as Uber was on its way to becoming the world’s most valuable startup. It boasted that drivers in New York City working at least 40 hours per week earned a median income of more than $90,000 per year, while San Francisco drivers earned more than $74,000.
For drivers working 52 weeks per year, that would average out to more than $44 and $35 per hour, respectively.
“Uber’s remarkable growth could end the era of poorly paid cab drivers,” read a 2014 headline from The Washington Post. Insider first reported Uber’s claims in a similarly unskeptical fashion. But those claims soon began to fall apart, with drivers telling Insider they were actually making between $5 and $20 per hour.
The Federal Trade Commission eventually accused Uber of misleading drivers by exaggerating their earnings potential by as much as 50%, alleging the median income was just $61,000 ($29 per hour) in New York and $53,000 ($25 per hour) in San Francisco. Uber agreed to pay $20 million, and not make false or misleading claims about driver pay, in order to settle the charges, the FTC announced in 2017.
Since then, Uber and Lyft have both been dogged by the question of how much they pay drivers, and despite the efforts of independent researchers, regulators, and reporters, the answer has remained elusive.
That’s because Uber and Lyft rarely share detailed data about driver earnings, and when they do, it’s usually presented in ways that overestimate what drivers are actually pocketing, according to some researchers who spoke to Insider.
As the companies try to get wary drivers back on the road, Uber told Insider drivers’ median earnings are nearly $42 per hour in San Diego and Austin, and more than $35 in other major cities. Lyft cofounder and president John Zimmer said last month drivers in the company’s top 25 markets are making $30 per hour.
Lyft did not respond to multiple requests for comment on this story. Uber provided median earnings for six US cities.
“We believe this is the best and most straightforward way to communicate earnings on Uber, which vary by when, how, and where drivers choose to drive. To suggest that the figures we have provided aren’t accurate is both unfounded and unfair,” Uber spokesperson Kayla Whaling told Insider.
But researchers told Insider it’s the numbers Uber and Lyft haven’t provided that make it difficult to verify what drivers actually make.
“If Uber is touting a certain hourly pay, they need to make clear what that’s based on,” James Parrott, director of economic and fiscal policies at The New School’s Center for New York City Affairs, told Insider
“If the data really would show that the drivers are earning a pretty decent pay per hour, you would think that they would make that data available because it would certainly help their case, their pitch to drivers to come back to the platform,” he added.
Pay raise or temporary pandemic surge?
From a strictly economic perspective, it makes sense that hourly earnings would go up during a driver shortage, Michael Reich, an economics professor at the University of California, Berkeley’s Institute for Research on Labor and Employment, told Insider.
“Drivers get more trips per hour, there’s less waiting time,” Reich said.
Uber and Lyft don’t pay drivers for the time they spend waiting for the companies to find them a ride, or 33% of the hours that drivers are active on the platform before the pandemic, according Reich’s research. That waiting time skyrocketed when the pandemic hit, as drivers competed for fewer passengers, and has likely dropped again as passengers return.
In other words, a driver in Austin making $42 per hour by Uber’s calculation may just be benefiting from less unpaid time between rides.
But Uber explicitly said these higher earnings will likely be temporary and will drop again if, and when, more drivers return.
The bigger question is “whether the companies are paying [drivers] more per trip,” Reich said, adding: “They’re not giving the answer and there’s really no way to come up with independent data to let us know.”
Even though Uber and Lyft have been charging passengers more, The Washington Post reported drivers don’t necessarily get a larger cut. That’s because they’re paid based on the time and distance of the trip, not what the customer pays.
Uber spokesperson Matt Wing told The Post Uber’s cut of each fare has stayed the same, but CEO Dara Khosrowshahi argued that decoupling driver pay from fares actually led to drivers taking home a larger share, implying Uber took less. Industry blogger Harry Campbell called Uber’s responses a contradiction that highlighted the company’s “lack of transparency” about pay rates. (Lyft also told The Post its cut has stayed the same).
“It’s very hard to take what the companies say at face value”
Khosrowshahi’s claim that drivers are getting more of the pie follows years of Uber and Lyft cutting rates as they’ve experimented with different pay structures.
Uber dropped rates from $2.15 to $1.75 per mile in 2017, and in 2019 from 80 cents to 60 cents per mile for California drivers (per-mile rates vary by location). Lyft followed with rate cuts of its own, and recently cut veteran drivers’ rates, with The Rideshare Guy reporting a Boston driver got their rates cut to as low as 66 cents per mile.
When making these cuts, Uber and Lyft have often claimed other changes in their pay structures offset drivers’ losses. Because of the multiple levers the companies can pull when adjusting pay, researchers need data beyond per-mile or per-minute rates or cherry-picked median earnings.
Last year, Reich and Parrott hoped to get that data when conducting a study on behalf of the city of Seattle to determine whether Uber and Lyft were paying drivers the minimum wage. Both researchers told Insider that, for such a study, they’d at a minimum want company data showing: how long drivers logged onto the apps, their total earnings, how many miles they drove (to determine drivers’ vehicle expenses), and what percentage of each fare the companies and drivers are pocketing.
But when Seattle asked the companies for that and other data, Lyft refused and Uber provided only limited summary data. Reich and Parrott had to rely on their own survey of 6,500 drivers, and concluded they made $9.63 per hour after earnings.
Parrott called Hyman’s study a “sleight of hand” that used Uber and Lyft’s preferred methodology of not counting the time drivers spend waiting and estimating vehicle costs at 30 cents per mile, even though the IRS estimates such costs at 57.5 cents per mile. Hyman declined to comment.
“It’s very hard to take what the companies say at face value, given that they have been very insistent all along that drivers only get paid when they have a passenger in the car” or on their way to pick up a passenger, Parrott said.
“Every labor economist I know who looks at this says that the drivers should be paid for their working time,” he added.
Uber and Lyft have argued they shouldn’t have to pay for waiting time because drivers could have multiple companies’ apps open in those times. But Parrott said agreements with local regulators, like the minimum pay law that went into effect in New York City in 2019, could allow companies to avoid this.
“Regulators really need to know”
Ultimately, regulators are the only ones with the ability to force Uber and Lyft to hand over driver pay data. But they are also hamstrung by the companies’ decision to classify drivers as contractors.
Unlike contractors, if an employee claims they’re being underpaid, labor regulators can demand data from the employer about that employee, and in some cases, all employees, Reich said.
“Regulators really need to know what the implications are,” he said, not just for driver pay, but also for congestion in cities
“I wish the regulatory agencies would demand that they be given the data, and so far, they don’t have a way to compel the data and that’s the problem,” Reich said.
Last year, Uber, Lyft, DoorDash, Instacart, and Uber-owned Postmates spent a record $203 million to convince California voters to pass Proposition 22, a company-authored ballot measure that let them avoid paying for new benefits the state had recently extended to their workers.
The companies said Prop 22, which created a new class of workers subject to different labor laws, would be a boon for workers of color and immigrants, who make up the vast majority of their drivers and delivery people.
But a forthcoming research paper by UC Hastings law professor and gig economy expert Veena Dubal argues that, despite the companies’ promises that Prop 22 would help achieve racial and economic justice for their workers, the law has had the exact opposite effect.
The new category of workers created by Prop 22, Dubal wrote, “is best understood as a new form of legalized racial subordination-lower wages and benefits for a people of color and immigrant workforce.”
Ride-hailing and food-delivery companies have pitched this hybrid employment status as an innovative “third way” to classify workers that offers the independence of being a contractor and some of the benefits that come with being an employee.
According to Dubal, such proposals are hardly innovative, and in fact look strikingly like discriminatory “wage codes” passed in the 1930s at the request of racist industrialists and plantation owners.
While those laws weren’t explicitly racist, their effects were. By exempting employers with mostly Black workforces, wage codes denied those workers minimum wage, workers’ compensation, unemployment insurance, and unionization rights enjoyed by workers in majority white industries.
Dubal argues that Prop 22 is a recycled version of those racialized wage codes, and that this time around, companies used social justice arguments to persuade people it would have the opposite result.
Uber, Lyft, DoorDash, Instacart, and Postmates did not respond to requests for comment on this story.
“There is a long history of systemic racism in traditional hiring practices, which is one of the reasons app-based work and the open access to earning opportunities it provides is valued by so many Californians,” Geoff Vetter, a spokesperson for the Protect App-Based Drivers & Services Coalition, told Insider. (PADS, formerly called Yes on 22, was created and funded by the above companies to generate public support for Prop 22).
Co-opting racial justice language
Last August, Uber plastered 13 major cities with billboards that read: “If you tolerate racism, delete Uber,” timed to its sponsorship of a march commemorating the 1963 March on Washington, where Martin Luther King Jr. gave his famous “I Have a Dream” speech.
In September, Lyft aired a commercial featuring Maya Angelou reading her poem “On the Pulse of Morning” to announce its plan to provide subsidized rides to underserved communities during the pandemic.
“NAACP California, California State National Action Network, Hispanic 100, Si Se Puede Foundation, Black Women Organized for Political Action, and other trusted social justice leaders and civil rights organizations” supported Prop 22, Vetter told Insider.
The PR campaigns came amid a summer of uprising against police brutality and systemic racism, which in turn put pressure on companies to address racism within their own walls.
But the campaigns faced swift backlash from drivers and driver advocates who called them “gaslighting” and hypocritical.
The “delete Uber” language originally came from angry customers boycotting Uber for sending drivers to JFK airport during a taxi driver strike in protest of Donald Trump’s Muslim travel ban. Lyft cherry-picked Angelou’s words, omitting her lines critiquing exploitative labor practices (while research shows that Uber and Lyft reduce revenue for public transit, on which communities of color disproportionately rely).
But the bigger hypocrisy, Dubal argues, is that the companies were “highlighting particular forms of racial subjugation, while ignoring and profiting from others” – namely, the racial subjugation of their own workers.
“New racial wage code”
During the Great Depression, Congress established the first federal minimum wage law, social security benefits, and union rights in a major win for workers.
But “racist demands” from industrialists and plantation owners led Congress to exclude agricultural and domestic workers – the majority of whom were Black – from those laws, subjecting them to seperate and unequal workplace conditions, according to Dubal.
Those exemptions let companies pay primarily Black workforces 20% to 40% less than the minimum wage, Dubal found, citing research by historian Donna Hamilton, “undermining the economic stability of Black communities for decades to come.”
Prop 22 isn’t much different, Dubal argues, but this time, companies are masking their arguments in racial justice arguments and confusing legalese rather than openly racist terms.
In 2019, California passed AB-5, extending long-standing minimum wage, unemployment insurance, workers’ compensation, and other protections to gig workers. After regulators and courts rejected claims by Uber and Lyft that AB-5 didn’t apply to them, the industry banded together to pass Prop 22, touting it as a boon to workers.
“Prop 22 guaranteed all drivers would earn at least 120% of minimum wage plus 30 cents per mile compensation toward expenses,” Vetter told Insider, pointing to claims by Uber, DoorDash, and Instacart that drivers are making more under the new law. (Companies’ earnings claims are difficult to evaluate because they refuse to share detailed pay data with the media, regulators, and independent researchers).
Dubal argues the bigger issue is that Prop 22 provides far less than what those workers should already have been receiving as employees under AB-5.
Under Prop 22, companies can: pay workers for only some of the hours they work; refuse to offer overtime pay, sick leave, family leave, and paid time off; cover just a fraction of healthcare costs; reimburse vehicle costs at barely 50% of the rate guaranteed to employees; provide bare-bones insurance that can leave drivers hanging out to dry; and avoid paying into unemployment and disability programs, shifting the burden to taxpayers.
These “second-class” labor protections, as Dubal describes them, become more problematic given the demographics of the workers subject to them. Lyft estimates that 69% of its drivers are people of color; one study estimates that, among all ride-hailing and food delivery workers in San Francisco, 78% are people of color and 56% are immigrants.
Ultimately, with Prop 22, Dubal wrote, Uber, Lyft, DoorDash, Instacart, and Postmates “obscured the way in which the law created a new racial wage code, claiming instead to offer economic opportunities for people of color and concealing the exploitative conditions endemic to those ‘opportunities.'”
Lyft’s quest for driverless cars is over. The company recently announced the sale of its self-driving unit to auto giant Toyota. The move isn’t surprising. Despite hefty investment, Lyft’s driverless utopia, like many others, remains more fiction than fact.
It wasn’t supposed to be like this. In 2016, Lyft President John Zimmer predicted that driverless cars would, “account for the majority of Lyft rides within five years.” By 2025, Zimmer reasoned, private car ownership will all but end in major US cities.”
Such reasoning was largely rooted in “techno optimism:” a deeply held belief that machines are superior to humans in terms of servitude. Sensors and software, after all, don’t complain, don’t tire, and don’t demand pay hikes – or salaries at all for that matter. This trifecta is purportedly a surefire way to lift profits. Hence, the tech-centric spending spree on all things autonomous. Ride-hailing companies have burnt millions over the years on perfecting the technology.
Yet, autonomous does not mean humanless. In Our Robots, Ourselves: Robotics and the Myths of Autonomy,” Historian David Mindell explains why. “There are no fully autonomous systems,” Mindell reasons. “The machine that operates entirely independently of human direction is a useless machine. Only a rock is truly autonomous.” Put another way, the type of automation ride-hailing companies are betting on to boost earnings doesn’t exist. It never has.
And if it did, humans would still play a role. The reason? Machines – much like humans – can’t be trusted to get it right all the time, every time. Take what is arguably the longest serving piece of automation today: the airplane autopilot. First introduced in 1912, the system is designed to balance an airplane so human pilots don’t have to. The result is a smoother, safer ride for passengers. But as we know, there have been hiccups. In 1985, a jetliner nearly crashed after the autopilot failed to inform the crew about an imminent ‘loss of control’ – a dangerous condition that can cause a crash. Because of such oversights, autopilot use today is contingent on human supervision.
This also explains why driverless cars remain, after years of development, not so driverless after all. Look beyond the headlines and you’ll find human overlords watch from afar over purportedly automated systems. Customer support staff are also on hand to answer rider queries – such as “What if I want to change my destination during the trip?” And then there’s an armada of pricey engineers standing ready to solve vexing road problems, like what to do when a lane is blocked by double-parked cars, orange traffic cones, or the occasional taco truck.
All this human capital means more, not less, expense; bloated, not pared down, balance sheets. And that’s problematic for an industry that has struggled to turn a profit. In 2019 alone, ride-hailing companieslost over $10 billion, their financial statements being described as, “a hemorrhaging fountain of red ink with no path to profitability.” Company execs had hoped self-driving investments would provide relief. The available evidence suggests otherwise.
It’s time we see the driverless dream for what it is: a Disneyland-style spectacle that can’t “live up to its sci-fi imaginings, a series of very expensive and glitzy pilot projects that can’t cut it in the real world.” Driverless technology may,, on its best days, be astounding, but those days have been few and far between. Self-driving algorithms may – given the frequency of human folly – make intuitive sense but intuition isn’t always right.
Earlier this year, the UK government suggested that driverless cars could soon hit the A10, an major road in England that connects London to various cities to its north. “We’re on the cusp of a driving revolution,” noted Transport Minister Rachel Maclean. But turning that revolution into reality demands a guarantee of technological perfection – a guarantee that few, if any, driverless tech developers can give. Until that happens, expect human drivers to stick around.
Around a quarter of Americans say they work mostly in the gig economy, and 62% of those workers say that they’d rather not, according to a survey published Wednesday by McKinsey and Ipsos.
“Gig workers would overwhelmingly prefer permanent employment,” the survey found.
That preference is even stronger among immigrants and workers of color, who disproportionately make up the gig workforce.
Among those groups, 72% of Hispanic and Latino gig workers, 71% of Asian American gig workers, and 68% of Black gig workers said they’d rather be permanent or non-contract employees, as did 76% and 73% of first- and second-generation immigrants, respectively.
McKinsey and Ipsos surveyed 25,000 Americans over the spring of 2021, and 27% percent of those surveyed said their primary job at the time was as a contract, freelance, or temporary work.
But their resounding preference for the security, benefits, and legal protections that come with employee status could encounter some tough resistance: their bosses.
Globally, 70% of executives – mostly from large US firms – said they plan to ramp up their reliance on contract and temporary workers, according to a McKinsey study from September.
Corporate America has aggressively opposed efforts to reclassify contractors as employees, in many cases arguing that workers prefer the flexibility that gig work claim to offer. But McKinsey’s latest findings suggest that executives – often citing surveys that their own companies funded – may not be as in touch with workers’ needs and wants.
While companies like Uber, Lyft, DoorDash, Grubhub, Amazon, Facebook, and Google have played leading roles in familiarizing American consumers with the gig-based business model, they’re far from the only ones who have leveraged contractors to skirt labor laws and minimize their costs. (Insider has contacted the above companies for comment, and will update this story if they respond.)
Executives in the lodging, food service, healthcare, and social assistance sectors, are especially keen on relying more heavily on contractors, according to McKinsey.
That model also hit taxpayers hard, as they subsidized unemployment benefits for contractors laid off by multibillion-dollar corporations that, despite record profits, hadn’t contributed a dime to those funds on behalf of their workers. Taxpayers coughed up $80 million in pandemic assistance for around 27,000 Uber and Lyft drivers who lost their incomes.
State and federal lawmakers are increasingly considering ways to secure better pay, working conditions, and legal protections for contractors, from California’s AB-5 to recent talks between unions and app companies in New York, though experts say more wide-reaching labor law reforms are needed.
Shortly before 9 p.m. on March 2, in Lakewood, Colorado, Drew Wajnert was rear-ended by a drunk driver who was going 85 mph, sending his car slamming into the median and fracturing his spine.
“When he came up to me and asked me how I was,” Wajnert told Insider, “What he may have not seen was, not only did he rear-end me at 85 miles an hour, but I spun into the concrete divider at 50 miles an hour, and then spun to the shoulder to a dead stop.”
Emergency services arrived on the scene within minutes, taking Wajnert to nearby St. Anthony’s Hospital, where doctors performed surgery to install a titanium plate and four screws in his neck. Months after the accident, Wajnert – now in a special spinal-cord injury rehab center at Craig Hospital – still has braces on his neck as well as both hands and knees, and while he has regained some feeling, there is no guarantee he’ll ever walk again.
As a full-time Lyft driver, Wajnert spent much of his time helping keep drunk drivers off the road. Now he’s trying to prepare for the many physical and financial challenges ahead.
“I’m fighting as best as I can, but I am hospitalized and Lyft really isn’t doing anything for me,” he said.
“We are deeply saddened by this accident and our thoughts are with Drew and his loved ones during this difficult time. We’ve reached out to Drew and a member of his family to offer our support and stand ready to assist law enforcement in any way we can,” a Lyft spokesperson told Insider. (Wajnert’s attorney, Kurt Zaner, said Lyft reached out after Wajnert began contacting media outlets to share his story).
Zaner said Lyft dropped a driver insurance policy when the pandemic hit that he believes may have covered Wajnert’s medical bills. Those bills could amount to hundreds of thousands of dollars.
Wajnert is planning to sue the driver, Alexander Marakas, who has been charged with vehicular assault, and possibly any bars that served Marakas, which could also be found liable for damages under Colorado’s “dram shop” laws. Marakas, through his attorney, declined to comment.
Lyft told Insider that, in Colorado last year, it didn’t make any changes to the insurance policies that cover drivers when they’re waiting for Lyft’s algorithm to find them a passenger (the phase Wajnert said he was in at the time of the accident).
But regardless of whether that specific pre-pandemic policy would have covered Wajnert’s accident, his situation reveals the glaring gaps in driver protections that are a direct result of Lyft classifying drivers as independent contractors. That strategy allows companies like Lyft and Uber to provide minimal worker protections, and helps them avoid legal and financial liability when drivers like Wajnert get hurt on the job.
A patchwork of policies
For Wajnert, who drove taxi cabs for 10 years in New Jersey, Lyft wasn’t a casual, part-time side hustle. Lyft has been his only source of income since signing up in January 2020, and he typically drove between 40 and 70 hours per week throughout the entire pandemic, completing 4,135 rides last year.
Wajnert leased his car, a 2019 Hyundai Santa Fe, through Lyft’s Express Drive program, costing him roughly $240 per week. Lyft charged Wajnert $500 after his accident, the deductible for the insurance policy on the vehicle. (The company told Insider it has since refunded that charge as well as the deposit Wajnert initially paid to rent the vehicle).
When it comes to drivers, transportation companies carry a variety of insurance policies, and Wajnert said he was under the impression Lyft’s insurance policy would be sufficient in the event of an accident, so he didn’t take out his own policy on top of that. In reality, Lyft has a complicated three-tiered policy that only kicks in when drivers turn on their app, and only provides limited coverage if its algorithm hasn’t yet found them a passenger.
Many companies also carry what are called uninsured/underinsured motorist bodily injury policies (UM/UIM). These policies help pay for an injured driver’s medical bills and other expenses in the event that the driver who hit them doesn’t have enough insurance to cover those costs.
Before the pandemic, Lyft had UM/UIM policies that covered drivers. But on March 31, 2020, Lyft dropped those policies in Colorado and nearly every state where they weren’t required by law, according to documents seen by Insider, leaving drivers in a majority of states with no such coverage.
Wajnert said Lyft never told him about that change, however, or at least not in a clear way, and that he “absolutely” would have bought additional coverage on his own if he had known.
“There was no grand email or reachout, no phone call from the [Lyft] Hub or anything like that,” he said. “I can’t understand why Lyft would carry insurance for people that we injure, but not insurance for its drivers when a reckless drunk driver hurts us.”
Lyft’s website still advertises that it provides UM/UIM coverage for drivers, in certain cases, with a small footnote indicating “coverage, where provided, may be modified to the extent allowed by law.”
Wajnert said he only found out about Lyft’s lack of coverage through his attorney, Zaner, after the accident.
“If this happened a year and a half ago, Drew would be able to make a claim with Lyft’s underinsured policy, most likely,” Zaner said. “Lyft carried $500,000 to $1,000,000 of underinsured coverage. It was a nice benefit that was pretty much expected in that industry; taxi cabs have the same kind of coverage, and they still do.”
Lyft said it carries third-party liability insurance in Colorado, a requirement of laws governing rideshare companies, as well as Medical Payments insurance, which it says results in faster payouts.
But the fact that Wajnert may still be left to foot the bill despite working for Lyft when he was hurt is ultimately a consequence of the company’s core business model.
The precarity of independence
As Uber and Lyft face growing calls from regulators and driver advocacy groups to pass laws reclassifying drivers as employees, the companies frequently defend their current business model by pointing to surveys saying the majority of drivers want to keep the flexibility they enjoy as independent contractors.
When employees are hurt on the job, they’re entitled to workers’ compensation, funded partly by their employer, which pays them for wages they missed out on because of their injury, and covers all of their medical bills. They can also qualify for occupational therapy to help them get back to work or, in cases like Wajnert’s, permanent disability if their injury prevents them from working.
“Workers’ compensation laws were written with automobile workers in mind,” Veena Dubal, a law professor at the University of California, San Francisco Hastings School of Law, who focuses on the intersection of technology and dangerous jobs, told Insider.
These laws emerged in the 1930s directly as a result of “widespread industrial injury and fatality, but particularly on railroads and as a result of automobiles,” she said, adding that they were written “precisely” to protect people like Wajnert who work in especially dangerous industries.
“It’s so incredibly tragic that he, and many, many, many hundreds of workers in this country … are in this situation where they essentially will no longer be able to work or support themselves as a result of how the companies choose to classify them,” Dubal said.
Companies face substantially more legal and financial liability for work-related accidents involving their employees than they do for contractors. For example, Amazon has relied on this model to minimize liability when its delivery drivers are injured (or injure others).
As a result, companies like Lyft and Uber have the legal flexibility and financial incentive to carry less extensive insurance.
If Lyft drivers were employees, according to Dubal, the company would likely have commercial insurance covering “all the time” drivers spend working, not just when they have riders in the car, which she said may be only 40-60% of the time drivers are on the road. Instead, Dubal said, what Lyft offers currently is “minuscule” compared what’s required of companies subject to commercial insurance laws.
And for drivers like Wajnert who come from jobs where their employers have more robust policies, the gaps in Lyft’s coverage can come as a surprise – and something they don’t realize until its too late.
“It’s horrible. I want to get the word out to Lyft drivers who are currently driving to be aware that they’re not covered [by UM/UIM policies],” Wajnert said, adding: “I basically was a full-time employee for them.”
Lyft does not classify its drivers as employees.
Wajnert is hospital-bound for at least another month, joined by his sister, Melissa, who had to move from North Carolina to stay with him due to Craig Hospital’s requirement that rehab patients have a caregiver with them.
While he’s trying to stay positive and his friends have started a GoFundMe campaign to help him make ends meet, Wajnert said it’s going to be a long road to recovery.