UNITED STATES—UBER and Lyft are some of the biggest ride-hailing companies in the world. With hundreds of thousands of drivers and millions of users each day all around the world, these businesses drive mobility globally. They have become so popular that some major cities around the world with traditional and culturally significant taxi networks are asking their local governments to ban UBER and Lyft operations within the region. For instance, in London, black cabs experienced a major revenue hit after UBER entered the market. But what makes them so different from other taxi services in various parts of the world? Why are they more affordable than traditional services and what problems do the employees come across?
The rise of Uber globally
UBER has an interesting story of practically an overnight success. It was founded in 2009 in the United States. It is headquartered in San Francisco, California, and offers services that can be accessed through their web platforms or mobile applications. The company became popular practically immediately in the United States, shortly covering major cities such as New York, Los Angeles, Washington DC, and others. However, the network soon started expanding across the Atlantic to London, Paris, Rome, and gradually covered the entire world. As of now, UBER operates in 785 metropolitan areas globally, covering over 10 thousand cities. Therefore, it now forms the biggest car-hailing network in the world.
The story is very similar to Lyft but UBER can be safely said to be the pioneer of the industry. In 2009, when the smartphone technology was just developing, the founders of UBER saw an opportunity and utilized it. Ever since the initial spark of popularity for UBER, similar companies started popping up locally and internationally all around the world. As of now, almost every major city has a similar service whether it is a locally operating company or an international mega-network like UBER.
UBER is an extremely complex system. It seems rather simple but considering that it operates in more than 69 countries, the entire network is quite diversified, adjusted to different types of GDP per capita rates, economic dynamics, income rates, and many other factors. Besides the financial and economic differences, the big issue is adjusting to the local legislative framework. Every country and even a locality comes with a unique legal framework when it comes to labor rights. The latter has become particularly important for UBER and Lyft lately.
UBER’s labor rights’ problem
UBER makes a lot of money. With the 2019 revenues exceeding $14.4 billion, the company is one of the largest employers of this type in many parts of the world. However, the extreme wealth of this lucrative business did not come without utilizing some legislative loopholes. UBER does not officially have employees. Rather, it has independent contractors that are not considered employees. But why did UBER need to change the entire structure of the company? What is in there for them?
It is quite easy and straightforward to understand. Depending on the jurisdiction within the United States and globally, employers have certain responsibilities towards their employees. For instance, they have to withhold taxes of a certain amount depending on the employees’ pay, guarantee social security payments, give them paid leaves, and provide health insurance. The latter is particularly important in the United State and other countries, where healthcare is not free and universal thus employees rely on the work-covered insurances. However, with contractors and slightly changed the legal structure of the business, UBER is not asked to provide any of the benefits listed above, including paid leaves and health insurance.
This is extremely unprofitable for employees. They work full time, sometimes even over time and do not get adequate pay or benefits for what they do. Yet, this is showcased by the company as a good structure for those who want to work with flexible schedules and need to be free from any extra responsibilities or restrictions. Nevertheless, UBER does not acknowledge that practically no legislation around the world prohibits flexible work schedules for employees. Rather, employment contracts simply provide a legal deal between the two parties about responsibilities and benefits. With the current structure, UBER and Lyft make enormous profits whilst their employees are left without any adequate employment benefits.
California is putting employees forward: the new law might change the way UBER drivers work
California has proposed a law that would require Uber, Lyft, and other companies with contractors to sign proper employment agreements with their employees. The court order would change the lives of thousands of registered UBER drivers that are currently “independent contractors” of the company. The issue became very relevant during the 2020 Global novel coronavirus pandemic, shutting down economies around the world. While employees with normal contracts were able to access unemployment benefits, healthcare services, and other advantages of being employed, UBER and Lyft contractors were left with barely anything. With so much uncertainty and the plummeting demand for car-hailing services in California and all around the world, many of the UBER drivers that made regular incomes out of the job were left without any money for the lengthy quarantine period.
UBER has been continuously criticized for its inability and unwillingness to provide adequate social and healthcare benefits to their employees. During the period of the pandemic, they came under unprecedented pressure from the government, drivers, and many of the community members amidst the unfairness of the company’s “independent contractor” policy. Representatives of UBER say, that changed laws in California will add extra expenses to the company, posing a major threat to the comparably cheaper prices that it now has to offer.
Live on CNBC, California’s attorney general opposed the idea that the new policy proposal can be detrimental for the company’s operations in California. Rather, Xavier Becerra said that this change in legislation will improve the quality of life of thousands of employees within the state, as well as potentially beyond it. The TV anchor said that according to UBER, the new policy will result in thousands of people losing jobs. However, according to the attorney general, the proposal will be a major improvement for those who experience underpayment and the lack of adequate support from their employers. The TV anchor also talked about the UBER’s statement that they might cease operations in California should the court ruling not be reconsidered.