After trying to negotiate its way out of California's new employment law defining who is and isn't an independent contractor, Uber called a press conference to make an astonishing announcement. Chief legal officer Tony West told reporters that the new law doesn't matter at all to Uber--because providing rides is not its primary business. If that statement makes you feel like you just stepped through the looking glass, you're not alone.
For anyone who hasn't been following California Assembly Bill 5 (AB5), it adds an important element to the state's definition of an independent contractor. Under federal law, Uber and Lyft drivers can be considered independent contractors--not employees--because they set their own schedules and are free to work for other companies. AB5 adds a third requirement. In order to legally define someone as a contractor, the hiring company must demonstrate that "the person performs work that is outside the usual course of the hiring entity's business."
Now, you may think that providing rides and deliveries is very much within the usual course of Uber's business, but West holds a different view, as he explained. "In fact, 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," he said (although when pressed he wouldn't name any such rulings).
That's right: You may have thought Uber was in the business of providing rides, but according to West it's really in the business of providing a platform for several different types of marketplaces. You can see why the company would prefer to be defined this way. Apart from the obvious benefits under AB5, in general Uber's liability is much more limited if it's merely providing a marketplace for customers and drivers to find each other rather than a ride or delivery service. On the other hand, West did not explain why Uber, the supposed marketplace platform, is setting prices for rides and compensation for drivers. Most marketplace platforms, such as Amazon or eBay, merely take a cut, allowing buyers and sellers to figure out pricing on their own.
Uber, Lyft pledge $60 million for ballot measure.
West's argument is especially intriguing when you consider that lawmakers voted on the law in the belief that it specifically applied to Uber, Lyft, and delivery companies such as DoorDash. And, West said, Uber and Lyft are spending a combined $60 million on a ballot initiative that will define a third category of employment as neither an employee nor an independent contractor. The purpose of this, West claimed, was not to gain an exemption from AB5 for rideshare drivers, but to be able provide them benefits without running the risk of being sued over the notion that they really are employees. As Uber and Lyft top executives put it in an op-ed in the San Francisco Chronicle: "Current employment laws...do not allow companies like ours to offer certain benefits without blurring the boundaries of employment and triggering a wave of litigation in which nobody wins."
Pause for a moment to consider what West is saying: That Uber is spending a presumed $30 million on a ballot initiative just so it can give its drivers better benefits and access to collective bargaining. This is a company bleeding money so badly it recently laid off more than 400 marketers. You might think Uber investors could suggest a few better uses for that $30 million.
And anyhow, Uber doesn't mind being sued. That was a big part of West's message. After January 1, when AB5 takes effect, Uber plans to just keep on doing what it's always been doing. Since Uber is a platform, not a ride-providing company, drivers are working outside its "usual course of business," and the law doesn't apply to Uber, West explained. City officials may not agree, and AB5 allows them to sue companies that disobey the law. San Francisco is apparently already mulling a lawsuit against Uber if it follows through with its plan.
West's response amounted to: Bring it! "Uber is no stranger to legal battles, that's for sure," he told a reporter on the call. In fact, the company is accustomed to them. "We recognize that there will be legal challenges on all fronts much of the time because we operate in a heavily regulated space that is very regulated on the local level," he said. He added: "I think it is an environment that we have gotten quite used to."
It's a good thing Uber is quite used to lawsuits. If it goes through with its current plan, there are certain to be lots more of them.