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Uber Continues to Roil the Composition of Worker Classification

Dec 15, 2015 9:30:38 AM

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Uber, with its crowd-sourced hiring model, has virtually launched the so called “Gig Economy” (see our recent post on that here) and rewritten the rules on the relationship between employers and labor. The flood gates of innovation opened by the success of Uber has, in some respects, destabilized the already tenuous balance of worker classification orthodoxy. And just as the human capital field had achieved an uneasy grasp on the legalities of the model, Uber again sits at the focal point of disruption to the rules with unintended consequences borne of its radical business model. Here’s the latest on the saga being closely followed by those who are responsible for workforce management and compliance with the laws that govern it.

By now, industry watchers are well-aware of the class action lawsuit wending its way through the California courts. In synopsis, Uber’s model claims that as a technology company, Uber is just a tool connecting supply to demand – independent car owners with private citizens who need a ride. Uber built the app that lets riders find available car-owners willing to taxi them to their destination and Uber collects a percentage of the fare (20% to 30%) for developing and maintaining the app. The drivers, says Uber, are ICs and not employees. For the most part, this claim holds up when scrutinized against the traditional methods for determining IC classification.

Enter Uber drivers in California who claim that although they own their own cars, they must adhere to certain rules put forth by Uber and as such, they should be afforded the same benefits and protections as W2 employees. Without wading into the validity of their argument, it is enough to note that the courts in the Golden State have found merit in their argument and have granted the plaintiffs the right to pursue a class action; a position fiercely rejected by Uber and the scores of “gig economy” companies that have cropped up since Uber’s meteoric rise.

The workforce management industry waits with bated breath to learn how this suit will conclude and they’re quietly preparing for the consequences to IC classification law should Uber fail in court. Yet, even before the verdict is even close to being rendered, the ground is again shifting beneath the collective feet of the industry. It was announced this week that Uber workers in Seattle have begun advocating for the right to organize a union and collectively negotiate on pay and working conditions (largely in response to Uber’s recent reduction in drivers’ portion of fares). Earlier attempts backed by the Teamsters Union in California to gain standing to unionize have been defeated. But the Seattle city council is expected to vote to allow Uber’s contractor drivers to unionize forming the ABDA or App-Based Drivers Association.

The New York Times reports today that there are strong legal defense avenues available to Uber in this case. The Times says, “Uber has two potential legal arguments against the measure if it passes. The first is that federal law reigns supreme when it comes to organizing, rendering a city ordinance on the subject essentially null and void. The second is that collective bargaining by independent contractors would amount to illegal price-fixing under antitrust law.”

It will be interesting to see how this case and the class action suit in California pans out. In any event, there will certainly be new modifications to be made to what is already a tangle of legal issues as relates to workforce planning and management. Keep abreast of the developments here at the nextSource blog where we’ll continue to monitor the emerging activities and make recommendations relevant to your workforce management programs as the situation continues to evolve.


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