Uber gave drivers more control to prove they’re independent. Now the company is taking back control because drivers actually used it.

GettyImages 1176816141 (1) NEW YORK, NEW YORK - SEPTEMBER 24: Dara Khosrowshahi, CEO, UBER, speaks onstage during the 2019 Concordia Annual Summit - Day 2 at Grand Hyatt New York on September 24, 2019 in New York City. (Photo by Riccardo Savi/Getty Images for Concordia Summit)
Uber CEO Dara Khosrowshahi.

  • Uber is revoking California drivers’ ability to set prices and see trip destinations in advance, the San Francisco Chronicle reported.
  • Uber gave drivers more control in 2020 to avoid reclassifying drivers as employees under AB-5.
  • But it reversed course after Prop 22 exempted it from AB-5, saying drivers turned down too many rides.
  • See more stories on Insider’s business page.

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.”

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Court rules Uber and Lyft must face worker-misclassification lawsuit from Massachusetts’ attorney general

Uber Lyft

A Massachusetts state court on Thursday rejected requests by Uber and Lyft to dismiss a lawsuit accusing the companies of illegally misclassifying their drivers as independent contractors.

The lawsuit, brought by the Massachusetts state attorney general Maura Healey in July, alleged the companies have denied drivers benefits and workplace protections guaranteed to employees by instead classifying them as contractors.

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 companies have also spent record amounts on lobbying as the worker classification issue takes the national stage.

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.

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Uber will pay its 70,000 UK-based drivers minimum wage and benefits following a major Supreme Court defeat

uber driver prop 22
Rideshare driver Teresa Mercado raises her fist in support as app based gig workers held a driving demonstration with 60-70 vehicles blocking Spring Street in front of Los Angeles City Hall urging voters to vote no on Proposition 22 on Oct. 8, 2020.

  • Uber is reclassifying its UK-based drivers as “workers,” it said in a regulatory filing Tuesday.
  • The move requires Uber to follow minimum wage, paid vacation, and other labor laws.
  • Uber strongly opposes efforts to reclassify its drivers, but pivoted in the UK after a legal defeat.
  • See more stories on Insider’s business page.

Uber announced Tuesday it will reclassify drivers in the United Kingdom as “workers,” guaranteeing them minimum wage, paid vacation, pensions, and additional protection under the country’s labor laws.

In a statement, Uber told Insider the move will impact more than 70,000 drivers, and follows a recent unanimous Supreme Court decision that determined drivers should be classified as workers.

Uber initially downplayed the ruling, saying it “focussed on a small number of drivers who used the Uber app in 2016,” though shares of Uber dropped as much as 2% following the ruling.

With Tuesday’s announcement, Uber has opted to reclassify all UK drivers rather than fight legal battles with individual drivers about whether the court’s ruling would apply to them.

“Uber is just one part of a larger private-hire industry, so we hope that all other operators will join us in improving the quality of work for these important workers who are an essential part of our everyday lives,” Jamie Heywood, the regional general manager for Northern and Eastern Europe, told Insider in a statement.

The move is a major shift for Uber, which has aggressively fought rulings by courts and regulators in the US that have determined drivers to be employees as opposed to contractors. In California, Uber spent at least $30 million persuading voters to pass Proposition 22, a law it co-authored that carved out an exemption from state labor laws to allow rideshare and food delivery drivers to be treated as contractors.

Unlike American law, which defines workers as employees or contractors, UK law has an additional “worker” category, which entitles workers to receive the minimum wage, paid vacation, rest breaks, and protections against illegal discrimination, retaliation for whistleblowing, and wage theft. That classification falls short of guaranteeing benefits like parental leave and severance to which full employees are entitled.

Uber said the UK minimum wage, which is slightly above $12, will serve as an “earnings floor, not an earnings ceiling” after accounting for roughly 62 cents in per-mile expenses, but that drivers won’t be paid for the time they spend waiting for a ride – which some researchers have found accounts for as much as 33% of drivers’ work.

Uber also said it will pay drivers around 12% of their earnings as vacation pay every two weeks and enroll them in a pension plan to which Uber will also contribute.

Labor advocates voiced their support for the move and the court ruling that proceeded it.

“Dear America … see what happens when a government lays it down? Is Uber leaving? No, they’re actually doing right by their workforce in the UK. Our drivers deserve this too. Why would an American company short change American workers? Because we let them!” tweeted California Assemblywoman Lorena Gonzalez, the author of AB-5, the state labor law that Uber sought an exemption from by pushing Prop 22.

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