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Michael Hiltzik: Uber, Lyft face a gig labor law reckoning

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If there were any doubt that California Atty. Gen. Xavier Becerra and his fellow regulators were getting fed up with the continued flouting by Uber and Lyft of the state’s new gig worker law, it was dispelled by their recent legal motion to force the companies into compliance.

In their June 24 filing, Becerra and the city attorneys of Los Angeles, San Diego and San Francisco asked a state judge in San Francisco to issue a preliminary injunction ordering the companies to immediately classify their drivers as employees rather than independent contractors.

That’s what’s required by the state’s gig worker law, known as AB 5. “It’s time for Uber and Lyft to own up to their responsibilities and the people who make them successful: their workers,” Becerra said the day the motion was filed.

After eight years of looking the other way, California officials are finally enforcing the rule of law against these so-called gig companies.

Veena Dubal, UC Hastings School of Law

It should surprise no one that Uber, Lyft and other gig economy companies see it differently and are girding for a fight — including a multimillion-dollar ballot initiative campaign — in which their survival may be at stake.

Designated as independent contractors, drivers are unprotected by minimum wage and overtime rules, receive no workers’ compensation or unemployment insurance benefits, and have to pay for their own gas, insurance, vehicle maintenance and Social Security taxes. They have no right to join or organize into a union.

The dodge of designating employees as independent contractors isn’t new. It was born in the notoriously anti-labor Taft-Hartley amendments of 1947, which first carved out the exception.

But it has become common in an entrepreneurial economy in which high start-up costs prompt business owners to search out savings in a marketplace in which “employment taxes and other workplace liabilities appear to be low-hanging fruit,” as Elizabeth J. Kennedy of Loyola University in Maryland has observed.

Uber, Lyft and other gig economy companies have exploited America’s lax workplace regulations to build businesses addicted to forcing the cost of business onto the shoulders of essential workers.

Even so, it’s unclear that their exploitation of workers has yielded a sustainable business model. Uber and Lyft acknowledge in financial disclosures that they might never become profitable under current circumstances and that things would become worse if they had to classify their drivers as employees. (Uber has lost $15.7 billion and Lyft $4.2 billion in the last three calendar years.)

Becerra’s action — the latest chess move in a lawsuit he originally filed May 22 — is just one of several prongs California officials have aimed against gig employers over alleged misclassification of employees in recent weeks. San Francisco Dist. Atty. Chesa Boudin sued the delivery service DoorDash on June 16 for classifying its delivery workers as independent contractors.

One week earlier, the California Public Utilities Commission, which had carved out a special regulatory designation for “transportation network companies,” informed the companies that as of last Jan. 1 their drivers “are presumed to be employees” and advised that the law requires them to provide the drivers with workers compensation benefits starting July 1.

Becerra’s action has been lauded as an overdue initiative to protect workers’ rights.

“After eight years of looking the other way, California officials are finally enforcing the rule of law against these so-called gig companies,” Veena Dubal, a labor law expert at UC’s Hastings School of Law, told me. “Because regulators chose not to enforce existing labor laws against the companies, they were allowed to grow precarious work — not just in this state, but all over the world.”

This isn’t a one-sided battle. The companies are fighting Becerra’s lawsuit and, perhaps more consequentially, have placed a measure on the November ballot to overturn AB 5.

Their measure, which will appear as Proposition 22, would effectively designate app-based drivers such as those working for Uber and Lyft permanently as independent contractors and forbid the state or localities to enact ordinances to treat them as employees.

The companies have provided the initiative campaign with a war chest of $110 million so far — $30 million each from Uber, Lyft and DoorDash and $10 million each from Postmates and Instacart, two other delivery services. So it behooves us to take a closer look at the measure.

Proposition 22 attempts to establish a new workplace model — a hybrid of the independent contractor and employment models.

The companies say it would preserve the “flexibility” to set one’s own work days and hours they say is valued by drivers who wish to work around school, caregiving and other work, while guaranteeing minimum pay and access to health coverage.

The measure would guarantee drivers earnings of at least 120% of prevailing hourly minimum wages, a subsidy for health coverage and protection against arbitrary firing.

The companies maintain that the vast majority of their drivers favor remaining independent contractors. Yet that’s misleading because drivers fall into two discrete camps. One is composed of true part-timers who record minimal hours, often abandon the work entirely after a few months, and appreciated the vaunted flexibility. The other is full-time drivers who may be spending 40 to 50 hours a week on the road.

Some 70% to 80% of drivers may drive 20 hours a week or less, says Harry Campbell, a former driver for Uber and Lyft who now runs therideshareguy blog, an information service for drivers. Full-timers, while less numerous, account for more than 50% of the hours worked through the companies’ app.

“For a majority of the drivers this isn’t a full-time income, so it shouldn’t be shocking that they want to stay independent contractors,” Campbell says. “But the drivers working 40 to 50 hours a week are basically working like employees without any of the benefits or protections. They’re the ones spearheading the effort to hold the companies accountable to treat drivers like employees.”

And they’re the drivers who would bear the brunt of the changes wrought by Proposition 22. Campbell says, however, that when even part-timers become educated about what AB 5 would do for them and that the law wouldn’t prevent the companies from allowing them some of the flexibility they crave, “some of them change their opinion of the law.”

There can be no doubt that the principal beneficiaries of Proposition 22 would be the companies themselves. If they were forced to classify their drivers as employees, according to the state’s nonpartisan Legislative Analyst’s Office, the resulting higher costs would “decrease these companies’ long-term profitability, which could reduce these companies’ stock market values and stock prices.”

The measure would impose some new costs on the companies, but those costs would probably be “minor,” the Legislative Analyst’s Office reckons.

Indeed, the compensation and benefits the companies would pay under Proposition 22 would fall far short of the costs their drivers must shoulder. The UC Berkeley Labor Center estimated in October that 120% of the California hourly minimum wage of $13 in 2021, or $15.60, would effectively shrink to $5.64 an hour because of provisions in the initiative.

For example, drivers would be paid only for “engaged” time, from when they are en route to pick up a passenger or delivery to when they drop off the rider or package, not for waiting time between assignments. That constitutes as much a one-third of their work time, Berkeley estimated, reducing the $15.60 to only $10.45.

Some drivers would gain from a stipend of up to about $367 a month for health insurance, which could be applied to Affordable Care Act plans from Covered California or other plans. But that would be granted only to drivers averaging 25 engaged hours a week or more. Those with 15 to 25 hours would receive half as much, and those with fewer than 15 hours would receive nothing.

“The vast majority of drivers would not qualify” for the benefit, Berkeley says.

Uber and Lyft have chosen to emphasize the purported consequences of enforcing AB 5, rather than the plain facts of their labor relationships. They , paint a picture of an army of disenfranchised drivers cast aside and unable to ply their trade.

They even hint that AB 5 could put them out of business entirely. Stacey Wells, a spokeswoman for the Proposition 22 campaign, said that if the initiative fails the companies might have to pare their driver ranks, which number as many as 400,000 in California, by as much as 90% to accommodate the added costs of treating drivers as employees.

Yet by any reasonable definition, the companies’ drivers are employees. According to rules set down by the California Supreme Court in a 2018 decision and codified in AB 5, businesses must consider workers employees unless they can meet a three-part test showing that the workers are free from the control and direction of the hiring business, that they’re performing work outside the normal course of the hirer’s business, and they customarily work independently in the same trade or occupation as the work they’re doing.

minimum earnings

UC Berkeley calculates that hidden costs would reduce the minimum earnings guaranteed drivers by Uber and Lyft in Proposition 22 by nearly two-thirds.

(UC Berkeley Labor Center)

Becerra maintains that Uber and Lyft can’t meet any of those elements. The drivers are engaged in the companies’ main business of transportation; their compensation is set by the companies, which can change it unilaterally; their performance is monitored by the companies; with the exception of the choice of the hours they wish to drive, all other terms and conditions of their work are set by the companies.

Uber and Lyft have maintained from the start that they’re exempt from AB 5 because they’re not really transportation companies, merely purveyors of the software that drivers and passengers use to arrange rides.

Some courts have dismissed that argument out of hand — “Uber simply would not be a viable business entity without its drivers,” U.S. District Judge Edward M. Chen of San Francisco declared in 2015.

Over the next few months, as the state lawsuit progresses through the courts and election day draws nigh, the survival of the gig companies’ business model will be put to the test. It should not be overlooked how much that model depends on exploiting workers.

“The initiative would codify terrifyingly low labor standards into law,” Dubal says, “undoing over a century of norms around a living wage and safety net protections for workers.”

That’s true. The power of workers to ensure decent working conditions has been on the decline in America for more than half a century. Proposition 22 would hasten the slide.



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How does the Uber decision impact the gig economy as a whole?

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The Supreme Court held that “Uber drivers were not in business on their own account”

We take a deep dive into this judgment which has had a final say on whether Uber drivers (and potentially other gig economy individuals) are workers.

A. ISSUES

  • Were Uber drivers working under workers’ contracts (and therefore qualify for the national minimum wage, paid annual leave and other workers’ rights)?
  • If so, were the drivers working under such contracts whenever they were logged into the Uber app (and not just when they were driving passengers to their destinations)?

B. PROCEEDINGS BELOW

  • The employment tribunal found that the drivers were “workers” as defined under s.230(3) of the Employment Rights Act 1996 (ERA), more commonly known as the limb (b) workers. The tribunal further found that the drivers were working for Uber London during any period when a driver had the Uber app switched on, was within the territory in which he was authorised to work and was able and willing to accept assignments.
  • The EAT and the Court of Appeal dismissed Uber’s appeal of the tribunal decision and the issues ultimately ended up in the Supreme Court. The case was heard on 21 and 22 July 2020 and the judgment was handed down on 19 February 2021.

 

C. BACKGROUND KNOWLEDGE

Section 230(3) ERA

The term “worker” is defined by s.230(3) as:

an individual who has entered into or works under (or, where the employment has ceased, worked under) –

(a) a contract of employment or

(b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer or any profession or business undertaking carried on by the individual;

and any reference to a worker’s contract shall be construed accordingly.

Limb (b) has three elements:

(i) a contract whereby an individual undertakes to perform work or services for the other party;

(ii) an undertaking to do the work or perform the services personally;

(iii) a requirement that the other party to the contract is not a client or customer of any profession or business undertaking carried on by the individual

This case was concerned with the first element of limb (b) viz., whether there was a worker’s contract. There was no dispute between the parties as to whether the services were performed personally (which they were) and that Uber was not a client or customer of the drivers.

The issue of whether there is a right of substitution in the contract and whether this was actively utilised in practice by the workers is an issue that is more pertinent to the second element of limb (b). This issue did not arise in this case (see below Section E Analysis).

Bates van Winkelhof v Clyde & Co

Lady Hale Bates van Winkelhof maintained that employment law distinguishes between three types of people:

  • those employed under a contract of employment;
  • those self-employed people who are in business on their own account;
  • intermediate class of workers who are self-employed but who provide their services as part of a profession or business undertaking carried on by someone else.

D. SUPREME COURT JUDGEMENT

ISSUE 1: WERE DRIVERS WORKING UNDER WORKERS’ CONTRACTS (AND THEREFORE QUALIFY FOR THE NATIONAL MINIMUM WAGE, PAID ANNUAL LEAVE AND OTHER WORKERS’ RIGHTS)?

The central plank of this judgment centres whether Uber drivers are to be regarded as working under contracts with Uber whereby they undertook to perform services for Uber as opposed to in business on their own account. The conclusion that Uber drivers are workers and not in business on their own account is based on three premises which will be considered below.

1. THAT WRITTEN TERMS OF A CONTRACT BETWEEN THE DRIVERS AND UBER ARE NOT A STARTING POINT IN DETERMINING THEIR WORKER STATUS.

The Supreme Court maintained that to state that a contract is a starting point is at odds with the purpose of statutory protection afforded to workers. Employers are often in a position to dictate contract terms and the individual performing the work has little or no ability to influence those terms that give rise to the statutory protections stipulated under the National Minimum Wage Act or the Working Time Regulations.

This approach is further supported by the fact that there is prohibition on contracting out of such statutory protections as can be found under s.203 (1) ERA which renders as null and void any provision or agreement that purports to exclude or limit the operation of the statute.

2. THE STARTING POINT FOR DETERMINING WORKER STATUS IS THAT ENDORSED IN THE CASE OF CARMICHAEL V NATIONAL POWER.

The House of Lords decision in Carmichael v National Power [1999] 1 WLR 2042 stated that where there is no written contract between the parties or at least where the written contract did not represent the true nature of the relationship, it would be appropriate to look at the following factors:

  • the language of the correspondence between the parties;
  • the way in which the relationship had operated;
  • evidence of the parties as to their understanding of it.

The Supreme Court stated that although written terms should not be ignored they are not to be treated as a starting point for analysis, especially where the bargaining power of the parties means that the individual had no say in drafting the terms and the written agreement would not represent how the parties actually conducted themselves. The Court also maintained that often the objective of the written terms is to circumvent altogether the statutory protections that would otherwise be afforded to the individuals concerned.

3. IN DETERMINING THE STATUS OF AN INDIVIDUAL WORKER, THE DEGREE OF CONTROL EXERCISED EMPLOYER IS OF UTMOST IMPORTANCE: THE GREATER THE CONTROL, THE MORE LIKELY THE INDIVIDUAL WILL BE CLASSIFIED AS A WORKER.

Key indicators of this control are subordination and dependence upon another person (employer) in relation to the work done. The greater the subordination and dependence, the greater the degree of control exercised by the employer.

CONCLUSION

Applying the above analyses, the Supreme Court identified five aspects of the employment tribunal’s findings to support the conclusion that Uber drivers were working for and under contracts with Uber.

  • The remuneration paid to the drivers is fixed by Uber and the drivers have no say in it.
  • The contractual terms under which they work are dictated by Uber.
  • Once logged onto the Uber app, the driver’s choice of accepting or rejecting requests is constrained by Uber, for example if the acceptance rate falls below a certain percentage then a penalty is imposed on the driver by way of being logged out for 10 minute before they can be logged back on.
  • The way the services are delivered by the drivers is tightly controlled by Uber, for example under the rating system, if it falls below a certain level for a period of time Uber can effectively terminate the contract with that driver.
  • Restriction of communication between driver and customer means that the drivers have little or no ability to improve their economic position through professional or entrepreneurial skill other than working longer hours whilst constantly meeting Uber’s measures of performance.

ISSUE 2: WERE THE DRIVERS WORKING UNDER WORKERS’ CONTRACTS WHENEVER THEY WERE LOGGED INTO THE UBER APP (AND NOT JUST WHEN THEY WERE DRIVING PASSENGERS TO THEIR DESTINATIONS)?

Put the question another way: during what periods where the drivers working?

The tribunal at first instance found that a driver was working under a worker’s contract when:

  • he had the Uber app switched on;
  • he was within the territory in which he was authorised to use the app; and
  • he was ready and willing to accept trips

Uber argued that the drivers were only working under workers’ contracts when they were actually driving passengers to their destinations. This is because, they argued, the driver had a right to turn down work even when they were logged onto the app and so the driver had no contractual obligation to undertake work for Uber whilst logged onto the app.

The Supreme Court rejected this argument on several grounds:

  • that the driver has the right to turn down work does not preclude a finding that he is employed under a worker’s contract so long as there is an “irreducible minimum of obligation” i.e. if there is an obligation to do some work, then the right to turn down work is not fatal.
  • the Welcome Packet issued to drivers at the start referred to logging onto the Uber app as “going on duty” and instructed drivers that “Going on duty means you are willing and able to accept trip requests“.
  • in reality, there was more than an irreducible minimum of obligation because a penalty would be imposed on those who turn down work too often.

E. ANALYSIS

This judgment is consequential not least because it does not just affect Uber but the companies in the wider gig economy which will have to (if haven’t done so already) review and rearrange their working model, in some cases quite drastically. As part of this effort, any analysis that relied on previous judgments that focused on the right of substitution will have to be adjusted to take into consideration this judgment. Although the substitution analysis is relevant to the second element of limb (B) under s.230(3) ERA (namely, personal service), this judgment will form the bedrock of determining the worker status going forward.

A key takeaway is that the Supreme Court has somewhat relegated the importance of written agreements between the parties as a mere factor to consider, and not a starting point for substantial analysis. This does not mean that employers should pay less attention to the written agreement but it does mean that the employers have to place greater weight and effort into aligning the written agreement with the actual practical aspects of how the workers work.

Another key commercial impact of this judgment is that attempts to maintain the quality of their brand will likely be construed as tools for control that enhance subordination and dependence of workers on the organisations.

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You fought Facebook, why not Uber? Albanese wants Morrison to fight for gig economy workers | The Canberra Times

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news, latest-news, facebook, uber, gig economy, media bargaining code

Opposition leader Anthony Albanese has challenged the Morrison government to take up the fight to gig-economy companies in same way it has technology giants Google and Facebook. Mr Albanese continued his campaign for industrial relations reform on Thursday, inviting rideshare and food delivery drivers to Parliament House to highlight poor working conditions in the sector. Labor plans to boost workers’ rights if it wins the next federal election, a move which could set up a brawl with major players in the sector. Asked if he was prepared to fight big global companies during an election campaign, Mr Albanese drew parallels with laws passed this week to ensure tech giants Google and Facebook paid news organisations for content. He argued that just as the Morrison government was using the media bargaining code to help protect the jobs of journalists, it should legislate to support gig-economy workers. Mr Albanese said in both cases new laws were needed to deal with issues which had emerged in the past decade. “The government, opposition and this parliament have been prepared to take tough decisions. We have been prepared to stand ground, to legislate for a code, and to do that in order to defend Australia’s national interests and defend the jobs of journalists,” he told reporters. READ MORE: “Labor stood with the government on those issues. It was the right thing to do. “[Gig-economy workers] James, Ashley and Malcolm deserve as much respect and dignity as the [journalists] at this press conference. They deserve it. “Josh Frydenberg got onto Mark Zuckerberg about Facebook. Why isn’t the government prepared to negotiate on behalf of these people?” Our journalists work hard to provide local, up-to-date news to the community. This is how you can continue to access our trusted content:

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Boost for gig economy as Reading and Leeds festivals set to go ahead

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Reading and Leeds music festivals will go ahead this summer following the Government’s announcement of a road map out of lockdown, organisers have said.

The sister events – known for their mix of rap, rock and pop – are due to take place between August 27 and 29 after both were cancelled in 2020 due to the onset of the pandemic.

According to plans announced on Monday, the Government hopes to lift all remaining restrictions on social contact by June 21 at the earliest.

This would mean larger events can go ahead and nightclubs can finally reopen.

Confirming their 2021 events would take place, the official Reading and Leeds Twitter account posted: “Following the Government’s recent announcement, we can’t wait to get back to the fields this summer. LET’S GO.”

Reading will return to the Richfield Avenue venue while Leeds will once again take place in Bramham Park.

Stormzy, Liam Gallagher, Post Malone, Catfish And The Bottlemen, Disclosure and Queens Of The Stone Age are all scheduled to headline across the weekend.

Acts including Charli XCX, Yungblud, rapper Jack Harlow, rockers Neck Deep and Norwegian singer-songwriter Sigrid were recently added to the bill.

Latitude music festival lineup

Liam Gallagher is due to headline (Aaron Chown/PA)

The UK festival circuit has been hard hit by the coronavirus pandemic with its 2020 season effectively wiped out.

In January Glastonbury was cancelled for a second successive year after organisers said they had tried to “move heaven and earth”.

Greg Parmley, chief executive of Live, a trade body for the live music industry, welcomed the news but said the festival season was still in danger.

He said: “Today’s confirmation that Reading and Leeds music festivals will be taking place in August is a great moment that will give people hope of better times to come.

“The Prime Minister’s announcement on Monday has given some organisers confidence but there is still a large amount of uncertainty ahead of us. With the Government only committing to provide a week’s notice on the lifting of all restrictions, this will mean for many it will just be too late and we will see further cancellations.

99% of Glastonbury tents taken home

Glastonbury was cancelled for a second time (Aaron Chown/PA)

“This is why, despite the good news today, the Government must commit to further sector-specific support for our industry in the budget as we start our long road to recovery.”

In response to the threat posed by the pandemic, the Digital, Culture, Media and Sport Committee launched an inquiry into the future of festivals.

Last month the committee wrote to Chancellor Rishi Sunak to ask him to extend Government-backed insurance schemes to music and performing arts festivals.

Festivals added £1.76 billion in gross value to the economy in 2019, with almost one in three Brits watching Glastonbury on TV.

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