By Doug Porter
A claim filed by a San Francisco woman against the ride-hailing service Uber has led to a determination by the California Labor Commission that drivers for the company are employees rather than independent contractors.
The decision could be a major blow to what economists are calling the “1099 economy,” a business model wherein companies rely on armies of low-cost independent contractors, setting the terms and conditions for employment without having to absorb costs like social security, health care and workman’s compensation.
The California Labor Commissioner said they’d determined Uber to be “involved in every aspect of the operation,” meaning that it’s more than just an app handling logistics. The driver who filed the complaint was awarded $4,000 in expenses.
The decision comes in the wake a June 12th disclosure by Fedex that it had settled litigation claiming the company short-changed its 2,300 drivers in California on pay and benefits by improperly labeling them as independent contractors. An appeals court ruled that Fedex controlled the manner in which the drivers did their jobs, including scheduling, appearance and equipment requirements.
The Consequences to Uber
At Uber, the company’s 160,000 drivers in the US must pay for their fuel and the maintenance of their own vehicles.
From Business Insider:
Right now, Uber has hardly any costs other than its 1,000+ employees in its San Francisco headquarters. Uber takes a percentage of every ride (20-30%). It doesn’t employ drivers, it merely connects supply (user requests on its app) with demand (independent contract drivers who are roaming around and have agreed to partner with Uber).
If this ruling sticks, Uber won’t just a logistics company printing money. The cost to run the business would skyrocket. Uber would have to seriously downsize the number of drivers it has as partners and provide benefits for them all.
Employees are expensive; tacking on 1 million+ more would be a huge blow to Uber, which was last valued at $50 billion. Companies have to pay social security and medicare taxes for each employee among other things, according to the IRS. They don’t have to do any of that for independent contractors.
Uber is appealing the ruling.
The Conditions of Contract Labor
“The 2015 1099 Economy Workforce Report,” released in May offered one of the first sweeping views of the conditions of contract labor across a broad variety of on-demand companies. Data was culled from responses by 1,330 surveys from workers with 78 companies, including Airbnb, DoorDash, Postmates, Homejoy, Thumbtack, Uber, Lyft, TaskRabbit and Instacart.
From the San Jose Mercury News:
A report released Wednesday, however, tells a more discouraging story about this growing class of contract workers — the thousands of people who work for on-demand tech companies as freelance labor and not regular employees.
As the valuations and profits of these companies soar, few benefits are trickling down to the laborers, creating a workforce that lacks the security of employee benefits and struggles with financial uncertainty.
“These companies talk a kind of political correctness about the new economy and about making things fairer and offering people new opportunities, but they aren’t living up to it,” said Andrew Keen, a commentator on the tech industry and author of “The Internet Is Not the Answer.”
Union-Tribune Coverage on Labor: Same as it Ever Was
Union-Tribune business reporter/columnist Dan McSwain covered yesterday’s press conference announcing the results of a survey on restaurant working conditions in San Diego.
Unsurprisingly, the results of the study were buried behind a wall of denial.
…we are invited to set aside common sense by a sensational report out Tuesday from the Center on Policy Initiatives and the San Diego State Department of Sociology.
McSwain did admit that local survey agreed with robust national studies showing wage theft and other labor law issues. But he was dismissive when it came to observations made via on site visits by graduate students indicating discrimination existed in the restaurant industry.
And there was this bit of libertarian wisdom thrown in:
Free-market economists have argued that an explosion of labor laws and regulations in recent years have, ironically, made the problem worse. Complexity creates financial incentives for cheaters.
Yes, how could we have forgotten the Golden Ages of the Free Market, back when child labor, seven day work weeks and the generosity of the company store dominated the workplace? If it wasn’t for those damned big labor law posters California requires, restaurant workers in San Diego would be living in the land of milk and honey.
But fear not, the market place is coming to the rescue:
…Perhaps San Diego’s low level of unemployment, which fell below 5 percent recently, will eventually give more abused workers the option to simply find better jobs, imposing market discipline on cheating bosses.
McSwain’s real beef about the study was its limited scope. After dropping hints the study could be thought of as something funded by labor unions or big gubmit (it wasn’t), he pines for a more robust study of conditions in San Diego.
I’ve got a great idea. Why doesn’t McSwain approach the Watchdog crew at the Union-Tribune to investigate further?
“This biased ‘study’ lacks good data and combines potential legal violations with the union funders’ and authors’ blatant political agenda.”
For my take on the SDSU/CPI study, see yesterday’s Starting Line column.
Meanwhile, Back in Fantasy Football StadiumLand…
The mayor and his coterie were all set to announce yesterday that the ballots for December’s special elections would be printed with team logos… But it didn’t work out that way.
After another meeting Tuesday with the San Diego Chargers, Mayor Kevin Faulconer seemed confident a stadium deal would be reached in time for a Dec. 15 special election, but the Chargers are signaling an end-of-the-year vote will not be possible.
The city presented the team with several options on how the project could comply with the state’s environmental laws and were expecting to hear back from the team by the beginning of next week.
At a post-meeting news conference at noon with city and county officials, Mayor Kevin Faulconer called the discussion a “productive exchange.”
Productive wasn’t a word used by Mark Fabiani, Chargers special counsel, in statement released a few hours later.
From the Los Angeles Times:
The Chargers said they have had three formal meetings with the city — the third taking place Tuesday — and numerous informal conversations, but could not find a way to create a stadium ballot measure for December that complied with the California Environmental Quality Act and met election law requirements.
Said Mark Fabiani, Chargers special counsel: “The various options that we have explored with the city’s experts all lead to the same result: significant time-consuming litigation founded on multiple legal challenges, followed by a high risk of eventual defeat in the courts…”
Even the PR guy for the stadium task force seemed discouraged:
“It appears the Chargers have pulled the plug on San Diego even though the city and county have gone out of their way to try and accommodate the team,” said Tony Manolatos, spokesman for the San Diego mayor’s stadium task force. “Instead of working collaboratively on a solution, the Chargers have thrown up one road block after another.”
Speaking of Neglected Facilities…
For Balboa Park, which attracts more than 10 million visitors each year, there is no special task force.
From KPBS, reporting on the crumbling plumbing at San Diego’s most prominent landmark:
“If we had a major flood here, the history of San Diego would be washed away,” said Charlotte Cagan, the executive director at the History Center. She’s worried that one of the 100-year-old underground water pipes might break. Cagan said they’ve already had four or five minor floods.
“And several of them have damaged collections, no question,” Cagan said.
The center has insurance, but historic items can’t be replaced. A water main break could cause serious damage. A complete upgrade to that system would cost millions. The city doesn’t have the money. And Cagan said it’s hard to get the public or a donor excited about plumbing.
“Deferred maintenance and infrastructure issues are not very sexy,” Cagan said.
Politicians Do the Funniest Things
No comment needed.
San Diego’s Darrell Issa (R-Calif.) tried to crash a meeting of the House Select Committee on Benghazi.
He was escorted out of the room and stormed off.
From the Huffington Post:
Elise Viebeck, a reporter for The Washington Post, tweeted that staffers could be overheard making fun of Issa for trying to crash the deposition.
Being escorted out isn’t the first indignity Issa has suffered since giving up his chairmanship. Rep. Jason Chaffetz (R-Utah), Issa’s successor, had a portrait of the former chairman removed from the committee room earlier this year.
Here’s a Vine clip of Issa’s bad day on the Hill:
On This Day: 1903 – Mary Harris “Mother” Jones led a rally in Philadelphia to focus public attention on children mutilated in the state’s textile mills. Three weeks later the 73-year-old she would lead a march to New York City to plead with President Theodore Roosevelt to help improve conditions for the children. 1928 – Amelia Earhart began the flight that made her the first woman to successfully fly across the Atlantic Ocean. 1953 – Soviet tanks fought thousands of Berlin workers that were rioting against the East German government.
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