After the California legislature passed AB5, a bill designed to force tech companies to treat gig economy workers as employees rather than contractors, Uber has pulled an well-worn card out of its hat: inventing an excuse to just like, not do that.
AB5 threatens Uber’s core business model because it could potentially force the company to treat its fleet of contract drivers as employees, which might entitle them to bothersome labor protections including minimum wage, health care, compensation for injuries suffered on the job, and the right to organize. It does so by codifying a three-part labor classification checklist applied by the Supreme Court in 2018 called the ABC test. One of those three tests is that for a company to classify a worker as a contractor, that worker must perform duties “outside the usual course of the hiring entity’s business.”
Uber is a company that makes the Uber app. The Uber app has various functions, the core of which—ridesharing—generated $9.2 billion in revenue last year, far more than its other ventures like scooters, food delivery, and freight. It is patently obvious that individuals who drive Uber rideshares for Uber customers are engaged in the “usual course” of Uber’s business, and that Uber controls the terms of work for those drivers (minimum Uber ratings, Uber-set pricing and compensation, etc.), just like it is patently obvious that those other ventures are, too.
Not so, says Uber! In its opinion, Uber’s “usual course” of business is being a “technology platform for several different types of digital marketplaces.” Per the New York Times, that means it won’t be preemptively reclassifying its workforce and will fight any attempts to make it do so in court:
Uber said Wednesday that it was confident that its drivers will retain their independent status when the measure goes into effect on Jan. 1. “Several previous rulings have found that drivers’ work is outside the usual course of Uber’s business, which is serving as a technology platform for several different types of digital marketplaces,” said Tony West, Uber’s chief legal officer. He added that the company was “no stranger to legal battles.”
In order to classify drivers as contractors, legal experts said, Uber would also have to prove that it didn’t direct and control them, and that they typically operated an independent driving business outside their work for Uber.
This is the absolute height of obfuscatory Silicon Valley bullshit: The law doesn’t apply to us because something something platform something something marketplace something something apps. What Uber chief legal officer Tony West didn’t mention when he noted the company was “no stranger to legal battles” is that they all arose because the company has consistently disregarded the law.
As the Harvard Business Review wrote in 2017, Uber’s core business model is arguably using regular noncommercial cars to evade regulations that apply to regular taxi companies, including rules on “commercial insurance, commercial registration, commercial plates, special driver’s licenses, background checks, rigorous commercial vehicle inspections, and countless other expenses.” (That’s not even counting its other blatant attempts to bend or break the law, like encouraging drivers to operate illegally in jurisdictions where it is banned, tracking reporters, developing a “Greyball” tool to blacklist regulators from ordering rides, and allegations of bribery.) Uber has consistently justified this behavior by saying it’s a tech company and this somehow means the relevant laws don’t apply to them—and as HBR noted, building up “distinctive capabilities focused on defending its illegality,” including extensive lobbying efforts in dozens of states designed to protect them from any consequences.
What is different now is that Uber, which has never made a profit despite feverishly working to undercut its competition and offload as many costs to drivers as possible, is starting to show some cracks in its facade. After it went public this year, its stock price has plummeted, and there have been multiple rounds of layoffs. The self-driving cars necessary to make Uber profitable are nowhere in sight (if self-driving cars would even make it profitable).
AB5 has the potential to make all those problems much worse, so Uber has every incentive to fight it ruthlessly. The law isn’t self-executing, which means that drivers and cities will have to fight Uber in a lengthy legal battle. Victory isn’t certain. But Uber and two other major gig economy companies, Lyft and DoorDash, are apparently nervous enough about their chances that they’re readying a $90 million war chest to support a ballot initiative that would effectively exempt them from AB5.