If organized labor and its allies in government are successful in their bid to force so-called gig economy companies like Uber and Lyft to treat their workers as employees rather than contractors, one of the main results will be a lot fewer people working. The companies will be forced to effectively fire people who don’t want to work about 40 hours—a major portion of the people who work for these companies.
At the beginning of the year, Uber had 1.2 million drivers in the U.S. using its platform to do ridesharing. The company now estimates that if it were forced to treat all of those drivers as full-time employees, the number would shrink to just 260,000, with the remaining 926,000—about 75 percent—unable to continue driving.
That is because one of key requirements of an “employer” under federal law is to set its employees’ schedules. The main purpose of this is to ensure that workers become eligible for overtime if they exceed 40 hours of work in a week. Schedules can change but the employer must give the worker advance notice of this.
If, however, the worker is classified as a “contractor,” that no longer applies. In legal terms, the worker is treated a separate, independent business and therefore not subject to the requirements and protections of most workplace laws. Critics of rideshare companies claim that exploits workers, since they don’t get overtime or the right to collectively bargain. California lawmakers passed AB5 last year to force the companies to do exactly that. Its implementation is on hold pending the result of a fall ballot initiative to scale it back.
But strict scheduling is anathema to most rideshare drivers. The typical driver does it on and off for a few hours a week to earn a few extra dollars, longer if their needs are higher. Only a minority view being a rideshare driver as a full-time job.
In California, for example, just 9 percent of Uber’s drivers are using the company’s app for at least 40 hours a week. That includes time spent waiting for and accepting trips, not just driving. A plurality of drivers is on the app for 25 hours or less, but they account for 42 percent of all drives in the Golden State. Uber wouldn’t be able to retain drivers who only wanted to work a few hours in a week, forcing it to drop 158,000 current workers. The state’s current unemployment rate is 11.4 percent.
“Uber would hire fewer drivers to each do more trips, and require them to work a certain number of hours. This would be hardest on part-time drivers, who would be more expensive to employ, because the cost of their employee benefits would be spread over fewer working hours,” Uber chief executive officer Dara Khosrowshahi said in a statement Monday.
Lawmakers should think long and hard about backing laws like AB5. Do they really want, “I fought to reduce employment and opportunities” to be their campaign platform?