Published: September 11, 2015
In August of 2013, four contracted drivers of the technology and transportation company Uber brought suit regarding missing gratuities. Around two years later, the fight jumped from four against Uber, to about 15,000 against Uber. How could something like this happen? Well it is sort of like four rotten apples ruining the bunch. Even if the other 14,996 didn’t care to be involved, they are now roped into it just as much as the initial four.
So what’s going on exactly? The original four drivers claimed that they were not being properly paid gratuity. The average industry-wide gratuity level for transportation companies is around 20 percent. Similarly, the drivers insist that they be paid expenses such as necessary maintenance, gasoline, and similar benefits. According to the transcripts of the district court of northern California, Uber disputes this by claiming that drivers, or “transportation providers” are not employees, and therefore Uber has no legal obligation to treat them as such. The transcripts continue, “In this litigation, Uber bills itself as a ‘technology company,’ not a ‘transportation company,’ and describes the software it provides as a ‘lead generation platform’ that can be used to connect ‘businesses that provide transportation’ with passengers who desire rides”. This is where the case’s true colors begin to be displayed. What is the difference between an employee and a private contractor?
Well, for starters, everyone under the sun will tell you that there is a difference between an employee and a private contractor, although few people can coherently articulate it. Out of 15 students polled, I found that 10 could definitively tell me that they were different, but only three of the 10 could give a clear, understandable answer. Four students defined a private contractor as basically the same thing as an employee, and one student thought the two words were interchangeable. Mark Miller, a first-year marketing and business administration major, described the difference as, “an employee would be an individual who is hired to do a range of jobs, while a person under a private contract is hired to do one specific job for a limited time.” He went on to describe how employees get more benefits and security in their jobs, while a private contractor’s employment is usually terminated upon finishing his or her given job. Michael Kulick, a first-year business management major, gave a similar definition. Kulick said, “an employee is someone who receives benefits from a company they work for while a private contractor is someone hired by a company to complete certain tasks without receiving the benefits normal employees would receive.”
So what is the difference anyway? The Internal Revenue Service defines a private contractor as, “an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.” Meanwhile, an employee is considered, “anyone who performs services for you.”
What does all this have to do with Uber contracting workers? Basically, by exploiting both the tax and social differences between employees and private contractors, Uber has been able to attract countless drivers with the ability to be your own boss, make your own hours and take home most of the money you make. Uber’s ability to consider itself a tech company, which simply enters into a contract partnership with drivers who use their application to find people in need of rides, is a reason for its quick growth in popularity and profit. For this reason; Uber has had so few expenses to pay. Since Uber does not spend money on gas, maintenance, insurance or damages, it can focus on the employees who work on the app itself. For these reasons, Uber has grown immensely since its conception in March of 2009. Since then; it has grown from a startup to a company now worth $50 billion.
If California rules against Uber and requires the company to consider drivers employees, the Uber will lose a lot of money.
Professor Cocco Ph.D., an economics professor at The University, suggests that a ruling against uber could possibly hinder its ability to perform in the free market, “I happen to like the free market and I would like individuals to take advantage of opportunity and not be shut out of what is a monopoly, like in New York where cab drivers hold a sort of monopoly. Uber users would suffer higher prices and poorer service.” Cocco said He also explained that having to consider drivers as employees would create a whole corporate structure ,which would most likely cost the company more money.
The ruling is still not out, but many investors are waiting anxiously to see what happens. The world will soon see if the newest way to catch a ride will have its brakes checked.