California’s labor commissioner said an Uber Technologies Inc. driver who connects with customers through the company’s app must be considered an employee, a decision that strikes at the heart of its business model.
San Francisco-based Uber, like other “sharing economy” startups, has built a business around a flexible car fleet piloted by people it contends are independent contractors. If Uber’s drivers were treated as employees, the company would be required to guarantee them a minimum wage, compensate them for mileage and pay into social security.
“We see this as a problem that’s growing larger with each year, with employees lacking security and even basic rights when they are treated as independent contractors,” said Steve Smith, spokesman for the California Labor Federation, which has backed tougher regulations on ridesharing companies.
As with any disruptive technology, Uber is capitalizing on loopholes it has identified to deliver a product. In this case, it's a lack of regulation around so called independent drivers who don't need govt licensing, training, vetting, or the overheads of an employer, and who provide their own capital (vehicles) for Uber to "clip the ticket on". Slowly, but surely, legislation will be imposed on their operations, bringing them back onto a level playing field with conventional taxi services.
Of course, Uber is an interesting, and some would say necessary development in the industry. It's only interest in this thread is it's impact on CAB's revenues, as Uber payments are done centrally through the local office. It would be fair to say that CAB was always open to any new payment technology (eg, mobile PayPal directly with a taxi drivers's smart phone), so in that sense Uber can't be singled out and demonized. What it does imply, however, is that CAB needs to expand it's offering outside the taxi industry with new growth models, and quickly. This it is doing with, eg, entries into parking fee payments and their regional bus contracts.
CAB Price at posting:
$4.17 Sentiment: Buy Disclosure: Held
