Don’t let Uber, Lyft shortchange staff

Too many US companies are building empires on the backs of low-wage workers. It’s a mistake to let it continue. California, for one, is fighting back. It sued Uber Technologies Inc and Lyft Inc in state court, contending that the ride-hailing companies violated a new state law by improperly designating drivers as independent contractors rather than employees to save on labor costs. The law in question is Assembly Bill 5, which requires companies to classify workers as employees unless they can establish that the work is outside the company’s usual course of business and that workers are free from the company’s control, among other factors.
There’s a lot riding on the distinction. Employees are entitled to minimum wage, overtime pay and other benefits, whereas contractors are not. Multiply the difference in cost by millions of drivers and the savings add up to a huge competitive advantage. So it’s not surprising that Uber is doing everything possible to bolster the case that it’s not responsible for drivers. Since California enacted the law, Uber has experimented with letting drivers set their own fares to demonstrate their independence. Its chief lawyer even claimed that “drivers’ work is outside the usual course of Uber’s business.”
Those efforts to disown drivers are laughable. Uber and Lyft are ride-hailing companies. Without drivers, there are no rides. Uber and Lyft also exert significant control over drivers, despite Uber’s assertion that it merely provides technology
to “independent, third-party transportation providers.” The companies determine who has access to the technology. They dictate the kinds of cars drivers can use. They require vehicles to pass their detailed inspection. They impose an encyclopedia of terms and conditions on drivers concerning fares, tips and general conduct. Does that sound like technology or a boss?
Aside from the fact that drivers are clearly employees by any reasonable application of California’s law, there are important public policy reasons why Uber and Lyft should be required to look after drivers. Labour is a big line item on many companies’ income statement. Those that neglect workers are able to undercut competitors, much the way Uber and Lyft are squeezing cab companies. And once they dispose of competition, it becomes difficult to dislodge them because they quickly amass market share and with it the power to dictate wages and discourage new entrants. What’s left is an industry with a small number of powerful firms in a sea of working poor.
The retail industry is well on its way. Amazon.com accounts for 55% of the S&P 500 Retailing Index by market value. The second-biggest company in the index, Home Depot Inc, is a distant second at 14%, and the rest of the field is miles behind. Amazon’s hostile takeover of the retail industry wouldn’t have been possible without its army of low-wage workers. The median total compensation for US full-time Amazon employees was $36,640 in 2019, according to the company, which is roughly half the amount realistically needed to raise a family in the most affordable towns in America.

—Bloomberg