Friday, July 3, 2015

(The Big Disrupt) Uber: Uber’s Californian nightmare

With Uber closing down operations in France and two of its executives being held under arrest, it’s surely time for the Google backed car hailing company to review its ill-advised strategy of getting under the skin of governments and taxi drivers across the planet.

Uber has been harassed, harangued and protested by governments and taxi drivers against in just about every country it’s operates in as the company has launched operations in countries with the truly naïve notion that the disruptive and regulatory implications of their service wouldn’t garnered them the attention of both governments and taxi drivers despite the vitriol and legal drama the company has faced wherever it went.  

Governments and taxi drivers have been all over Uber like a hot rash for a number of reasons but the main contention has been over Uber’s reluctance to be pinned down as a taxi service and therefore avoid dealing with the burdensome regulations that come with it. Uber have consistently described themselves as an app service which largely doesn’t wash with either governments or taxi drivers who have to compete with a popular and cheaper service that’s not beholden to the regulations they are.

Taxi drivers everywhere have cried foul over Uber’s ability to flout regulations and have taken to the streets as the California based company represents an extinction level event to their industry. While characterizing Uber as an extinction level event for the taxi industry might sound hyperbolic, tell that to French taxi drivers whose protests against Uber turned violent as, according to The Hamilton Spectator, “100 Uber drivers ha(d) been attacked, sometimes while carrying customers”[1].

Taxi drivers and fleet around the globe would probably take Uber’s disruption on chin if Uber played but rules of the road but Uber, intent on arguing its status as merely an app service that simply connects consumers with drivers, have other ideas. The reason Uber make this argument beyond actually seeing themselves as an app service is that Uber don’t want to insure their drivers as doing so will make insurance costs one of the company’s largest expenditures and fast. It’s why Uber has had to brave legal battles, bans, and protests in every country it operates in and the bad press that comes with it as Uber simply doesn’t want to take on a very large liability.

So far, it’s been Uber’s drivers taking on the insurance liability forcing drivers to lie to their car insurance providers who’ll likely raise their rates or potentially drop them altogether. However, Uber will no longer be able to have their cake and eat it in California at least as thanks to recent changes in the law, Uber now have to cover their drivers from the moment they use Uber’s app to the moment drivers turn it off.

Insurance company executives must be jumping for joy in their boardrooms upon hearing the news of the California law change as it part of a growing trend of states in the US changing their laws to make sure that Uber insures their drivers. Uber executives however are likely to have their heads in their hands wondering why California of late has been tough on them as the Californian labor commission ruled that Uber drivers were employees as opposed to contractors.

It’s one thing that states are pushing to make Uber insure its drivers but recognizing their drivers as employees is literally Uber’s worst nightmare as insurance is merely a drop in the pool compared to the costs the company will incur if its drivers are ruled as employees as rulings like this “opens Uber up to higher costs, including Social Security, workers’ compensation and unemployment insurance”[2]. Should more states in the US and countries across the globe make similar rulings, Uber’s business model will be seriously hobbled by onerous obligations and raise driverless cars a rungs up Uber’s corporate agenda from a far flung ambition to the organizations top business priority.

In sum, Uber, despite the bad press, protests, and legal battle have largely had their own way but with the double whammy served up by their home state in making them cover their drivers and, more importantly, recognizing them as employees, Uber could find themselves in real trouble should other states and countries follow the Californian example.

[1] The Hamilton Spectator, 2015, French taxis strike after weeks of rising tension over Uber,
[2] C. Johnson, 2015, Uber drivers are employees not contractors, California rules,

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