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?
The Times of San Diego coverage included, in addition to the report’s actual numbers (which mostly escaped McSwain’s reporting), a statement from the head of the California Restaurant Association:
“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.
From KPBS:
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.
Did you enjoy this article? Subscribe to “The Starting Line” and get an email every time a new article in this series is posted!
I read the Daily Fishwrap(s) so you don’t have to… Catch “the Starting Line” Monday thru Friday right here at San Diego Free Press (dot) org. Send your hate mail and ideas to DougPorter@SanDiegoFreePress.Org Check us out on Facebook and Twitter.
Doug Porter
Latest posts by Doug Porter (see all)
- Last Call. Last Column. - December 14, 2018
- Which Presidential Candidate Will You Support in 2020? - December 13, 2018
- Mounting the Assault on Big Gay and Other Drivel From SDSU’s Minimum Wage Scrooge - December 12, 2018
I’m a little surprised that this 1099 thing seems to be new. Back in the early 90s, I worked for a company that used several independent contractors and used the 1099 method for them. Our HR department and counsel put a stop to it because we were doing it improperly as Uber is doing. We told there were three criteria. If the you directly supervised the contractor, if you provided office space and equipment to perform the work, and if the work they did for you was all they did (or some large percentage of their total workload), they were considered employees and not contractors. That was more than 20 years ago; I’m surprised to hear the business model that Uber and others are using was ever considered valid.
Some employers try to get away with not paying the state, federal and FICA(SocSec) taxes for their employees, so they do this by saying these employees are “independent contractors” and then the employees have to file their taxes as being “self employed” and keep more records to determine their net profit. I bet that this company HR dept. was challenged by an employee or employees and/or the co. lawyer let the company know. Social Security makes these decisions also. It appears Uber wanted to cut down on their paperwork and taxes.
McSwain knows that interviews with 337 employees at selected restaurants is more than he’ll do in a year; he’s paid to consult with CEOs and he also knows they won’t answer his phone calls if he gets critical. So, he’s empowered to describe the CPI/SDSU Sociology report as “sensational,” and to display his total indifference to the report’s main finding that more than 200 of the surveyed employees reported they hadn’t been paid, or were made to work overtime without pay or to work their shifts without food breaks. I’m wondering if he has a daughter or grandson working in those restaurants, and if he’s asked them the conditions they work in.
Good points all. McSwain calls the CPI/SDSU report “sensational” but doesn’t explain HOW it’s sensational … probably because it isn’t: It’s in line with “robust national studies,” as someone pointed out. And who, exactly, pointed that out? Why, McSwain himself, in the same column; doesn’t he read his own stuff? And his in-column solution to a problem from a report (a pilot study, actually) he’s already dismissed is “market discipline”: Once the unemployment levels fall low enough, all those abused workers can just quit and find other jobs. Better that, McSwain declares, than more “regulation,” i.e., cracking down on employers to ensure that they obey the law. As for the California Restaurant Association’s response to the report — “This biased ‘study’ lacks good data and combines potential legal violations with the union funders’ and authors’ blatant political agenda” … interesting! Please elaborate: 1) In what way(s) is it biased? 2) What “good data” is it lacking? Which of the data is bad? 3) Potential legal violations? Wow. That’s serious. So … what are they? 4)”Blatant political agenda” is possibly a good point. The agenda in question, however, seems to be fair treatment for working people; got a problem with that? And by the way: 5) Putting the word “study” in scare quotes doesn’t make the study inadequate or suspect — it just means you typed an open quote and then a close quote.
If the restaurant association was smart, they’d get a clue from what’s happening to the Micky D’s brand (or do they really think it’s all about the menu?) and others getting called out for mistreating their employees and start advocating for ethical behavior. Instead, they deny, deny, deny… and when that isn’t working they start calling names.