Friday, April 22, 2016

"How Uber's big settlement may make things worse for its drivers"

I've been wondering what happens to the drivers if gasoline prices double.
Uber provides a credit card that gives drivers a minimum three cent per gallon discount but it appears there is a real risk to the driver's income if costs rise without an offsetting increase in fares, something Uber seems very reluctant to do.

From the Los Angeles Times:
If there's one thing the ride-hailing company Uber has become great at, it's identifying legal threats to its business model. That's the reality behind its $84-million settlement Thursday of two federal class-action cases brought by drivers. The cases could have forced Uber to classify its drivers as employees, not independent contractors, a change that could impose billions of dollars in costs on the company, eroding its potential profitability and its supposed value.

The deal covers about 385,000 drivers, who pay their own expenses while serving passengers sent their way via Uber's mobile phone app. Uber sets the fares, regiments much of the drivers' work activities and behavior, and takes more than 20% off the top. The lawsuits asserted that these conditions make the drivers tantamount to employees, despite Uber's contention that they're free to drive when and where they choose.
If we had not settled, there were some serious risks that all we have fought for - and have achieved - could be taken away.
-Shannon Liss-Riordan, attorney for Uber drivers
The settlement, which could rise to $100 million if Uber goes public at a valuation well beyond its current private market value of more than $60 billion, doesn't resolve whether the drivers are employees. Other lawsuits over that issue are pending, as well as union initiatives and an investigation by the National Labor Relations Board. The settlement does, however, underscore that litigation can be a thin reed for workers trying to redress inequities in the workplace. It's expensive and time-consuming, and the outcome anything but certain.

"If we chose not to settle this case, we faced risks,” said Shannon Liss-Riordan, the attorney for the drivers, in a prepared statement. Among these was “the risk that a jury in San Francisco (where Uber is everywhere and quite popular) may not side with the drivers over Uber." Liss-Riordan also seemed to be rattled by a recent ruling by a federal appeals court in San Francisco that placed the class designation in one of the two cases under new scrutiny, with the possibility it could be overturned. (The second case was filed in federal court in Boston.)

"If we had not settled," she said, "there were some serious risks that all we have fought for - and have achieved - could be taken away." She added, "importantly, the case is being settled - not decided. No court has decided here whether Uber drivers are employees or independent contractors and that debate will not end here." We've reached out to Liss-Riordan with questions about the deal, and will update if we hear back.

The key question left unanswered by the settlement announcement is whether the drivers are receiving enough in return for what they're giving up. As is often the case with class settlements, the big headline number obscures how little trickles down to the plaintiffs. In this deal, drivers with the most time and mileage recorded with Uber are in line to receive one-time payments up to about $8,000. Nothing fundamental in the balance of income and expenses will change as a result of the deal--drivers will still be on the hook for gas, insurance, and wear-and-tear on their vehicles, and Uber will retain the right to set fares and extract fees and commissions of more than 20%.

Yet settlement of the cases is surely a good deal for Uber by removing what it plainly regarded as a massive threat. Had the litigation continued, it might have put the company's entire business model on trial, exposing the degree to which the economic benefits of the so-called "gig economy" flow heavily, even exclusively, toward investors and executives at the expense of those providing the core service...MORE
"Uber will pay $100 million to settle the biggest legal threat to its business"