Consumers love it for its convenience, speed and lower prices, but Uber, the U.S. car sharing platform that may or may not be a taxi service, is clearly the Public Enemy No. 1 among licensed cab drivers in most of the world.
Last week, the battle between cab drivers and their biggest competitive threat spilled over into violence in France.
During a demonstration, taxi drivers in Paris overturned an UberPop vehicle -- a private car used by one of Uber's non-licenced drivers -- during a clash with police.
UberPop has been ruled illegal in France, but taxi drivers believe UberPop drivers are ignoring the law.
On Tuesday, French authorities intervened, against Uber.
Police indicted the top two Uber executives in France on a range of charges including allegations of providing illegal ride-sharing services.
The arrests were simply one more step in Uber's long running battle with taxi companies and local authorities around the world.
From South Korea to the Netherlands, people are asking whether private, ad hoc drivers that the company provides in its service called UberPop, or UberX in the United States, through a ride-sharing app, should be required to obtain official permission to convey passengers.
In Germany, opposition from taxi drivers led the Frankfurt District Court to order that Uber drivers must be accredited as taxi drivers by conventional means, which would undermine the U.S. company's business model of using non-professional drivers.
It was a setback for Uber, which is about five years old and aggressively expanding. The company's challenges also continue at home, over the issue of whether Uber's drivers are independent contractors or employees.
The California Labor Commission earlier this month recognized the existence of an employee-employer relationship within the company.
The status of drivers may call into question the core of the business model not only of Uber and its competitors such as Lyft but also including Airbnb and other similar service providers that are part of the sharing economy.
Uber objected to the California ruling vehemently, saying the decision wasn’t generally applicable and will be appealed. Drivers have “complete flexibility and control” regarding their rides and are therefore independent entrepreneurs, the firm said. The governmental authority previously held to this opinion and was now contradicting itself, Uber added.
Similar issues are being raised not only about Uber but also its competitor Lyft and providers of household services and package delivery, for example.
Most of the time, the largely digital platforms argue they are simply bringing supply and demand together and actually don't have anything to do with the core service, which is provided by independent contractors.
Hence Uber and the likes are not employers.
The employment status of the people who provide rides and other services is important. According to a law firm in Boston, hundreds of drivers are attacking Uber via a class-action lawsuit. The drivers seek clarification about whether they are employees and have a right to reimbursement for gasoline and repair costs.
It might very well be that what comes next from California isn’t a technological revolution but an upheaval of labor law and social policy.
That might be only the beginning.
If the independent workers became employees in the eye of the law, then there has to be a debate on whether the employer should contribute to social-security taxes, paid vacations and taxes. That would generate high costs for companies such as Uber.
It also would put an entire business model into question. The sharing economy wouldn’t have become so popular if no one had standardized the sharing of services and made it technologically feasible.
Now, the questions are who profits from this on-demand economic model and to what extent. What disadvantages arise and who is liable for them. Whether sharing brings a special responsibility — and if so, what and for whom. It might very well be that what comes next from California isn’t a technological revolution but an upheaval of labor law and social policy.
Whether someone is a freelancer or an employee depends upon the degree to which he or she is controlled during work. In the United States, things are quite similar to the situation in Germany: the more freely someone can organize his or her work, the more a worker counts as an independent entrepreneur.
In order to determine the degree of freedom, U.S. law is evidence-based. These were to some extent worked out decades ago, when taxi drivers initiated legal proceedings similar to the ones by some Uber drivers today. In 1991, the California Supreme Court determined that an employment relationship exists when the ordering party “retains pervasive control over the business process as a whole.” The burden of proof lies with the company that asserts that its staff is self-employed.
Uber argues that it’s simply a neutral technology platform financed by a share of fares. Drivers have the prerogative of refusing individual orders, earning their living from other sources as well and even accepting orders from competing car-service providers. The California Labor Commission didn’t accept this reasoning and ruled that Uber “is involved at each point of the operation.”
Uber requires detailed information from its drivers such as their home address, bank information, social security status and driver’s license. Drivers have to register their vehicle with Uber, which has requirements as to the car’s age and technical condition. Whether someone is permitted to drive for Uber over the long term depends on how passengers evaluate the worker, usually via their smartphones after a ride. Quite a handful of requirements, just as with an employee.
It will take a while before this dispute will be resolved. And the answer might turn out to be quite different in the United States than in other countries and legal systems. Some countries might decide Uber must reimburse drivers for things such as fuel, repair expenses and the payment of parking tickets and perhaps even has to make social security payments on behalf of drivers.
Uber's chief executive, Travis Kalanick, stated in early June that his firm “is gaining hundreds of thousands of drivers each month throughout the world.” Some cities have more than 10,000 drivers each.
Even if only a fraction of them were to be recognized as employees, Uber would no longer be the revolutionary company that it presented itself to be in 2009. Its main idea was that it should be necessary only to press a button in order to summon a car, give someone a ride and thereby generate revenue.
In Germany, Uber is struggling to win drivers, as all drivers need to be licensed. Its country manager Fabian Nestmann told the weekly magazine Wirtschaftswoche it could take up to 14 months for a driver to gain permission to take passengers in a car. He complained the Chamber of Industry and Commerce did not provide sufficient slots for drivers to take the exams they need to pass, saying in some cities, only a few places were left for the rest of the year.
Uber is working with the authorities in Germany to speed up the process so that regular drivers can pass the certificates needed to provide the UberX service.
But questions remain: as with other companies in the sharing economy, Uber was successful in organizing the large potential of small and seemingly insignificant courtesies exchanged by people. But it was even more successful with the idea of monetizing this sharing.
Uber is estimated to be worth more than $40 billion. That’s quite a sum for a company that says it’s only a neutral platform that leaves the remunerative driving business to others. The value of the company, however, is being shared with investors only.
This article originally appeared in Die Zeit. Allison Williams contributed information from WirtschaftsWoche to this article. To contact the author: [email protected]