if your business model requires that your employees not be recognized as employees, maybe you need a new model?

A California court just ruled that Uber drivers are employees. Here’s the (pro-Uber) coverage from Business Insider. Note how the story accepts Uber’s versions of the facts about who counts as an employee:

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 be a logistics company printing money, at least in California. The cost to run the business there would skyrocket. Uber would have to seriously consider downsizing the number of drivers it has as partners and provide benefits for them all.

I hope the ruling does stick. It seems to me that if your business model requires that your employees not be recognized as such by regulators, maybe your business model is actually awful. Maybe not awful for the business, but it’s almost surely shifting costs somewhere (onto the state, onto insurance companies, etc.).

As to the question of whether Uber drivers are ‘really’ employees, the ruling’s logic is clear and well-argued: Uber controls the tools drivers use (the app), makes hiring and firing decisions (requiring background checks, deactivating drivers with low scores), sets the price of trips, and owns all relevant assets except the driver’s car and labor. The work of drivers “entails no ‘managerial’ skills that could affect profit or loss.”

Whether or not it stands, the ruling does show one of the most basic absurdities of America’s political economy: you have to be an employee to get basic benefits. As much as I may dislike Uber’s attempt to take advantage of the system, this contestation does highlight just how bad an idea it is to link programs like social security and health care to employment. If your political economy requires people to be employees to be eligible for benefits, your political economy is definitely awful.

For interesting historical reflections on the nature of who counts as an employee, check out Vinel’s interesting book on the subject. For the history of how health care benefits became linked to employment in the US, see Starr’s influential history of American medicine (among many other sources).

Author: Dan Hirschman

I am a sociologist interested in the use of numbers in organizations, markets, and policy. For more info, see here.

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