California’s Uber Decision is a Disaster

A recent ruling by the California Labor Commissioner found that drivers for ridesharing service Uber were employees, not contractors, as the company contends. Although this ruling applies narrowly, to the litigant in question, its implications are wide-ranging and, in many ways, disastrous.

The set-up of Uber (and other sharing economy companies like Lyft, TaskRabbit, AirBnB, etc) relies entirely on the assumption that the company is a platform first and foremost, one designed to facilitate exchanges between people with a particular service to offer and others who wanted to purchase it. Pursuant to this arrangement, every driver for Uber is a 1099 contractor rather than a legal employee. This allows for a level of independence of operation and flexibility of scheduling that traditional employees don’t receive.

What the California Labor Commissioner found was that, because Uber is “involved in every aspect of the operation,” the drivers are not technically independent contractors, but full employees, and therefore are entitled to Social Security, workman’s compensation, unemployment insurance, and other benefits. Uber contends that paying this out to every one of their drivers would basically destroy their business as they know it, by lowering their valuation and pricing out many of their low costs.

It’s popular for young lefties to hate on Uber nowadays, but I’m not that kind of liberal. I’m the kind of liberal that remembers the root of the word itself, and I have to side with Uber on this.

There are a couple of reasons for this. The first, and most straightforward, is legal: I don’t think that Uber’s drivers can really be considered employees. They have a level of autonomy that baristas and brogrammers don’t. They decide their own hours, how many of those hours they work, who they pick up; it’s entirely on them. This flexibility is a big part of the appeal of the job for a lot of drivers.

The second reason that I side with Uber is more philosophical: I think they’re, fundamentally, doing a good thing. Taxi companies, to put it politely, suck. Uber and Lyft provide a competitive edge that taxis have never really faced, and in a lot of ways, they’re winning. By offering low barriers to entry and a huge amount of autonomy to their drivers and a more streamlined (and, in many ways, more responsible — your driver’s photo, name, and phone number, not to mention ratings and comments, are saved on your phone in case they’re terrible, which is more than a taxi will offer) option for consumers, rideshares have shot a powerful blow across the bow of the taxi companies. To rule against Uber in a court of law is to privilege companies that we know to be corrupt and inefficient. To draw a line around Uber is to build a wall around the taxis. This is what always happens in situations like this, and it’s a prime example of how corporate-state collusion comes together to create a less free and less fair society. So much government regulation is performing surgery with a sledgehammer, and when a regulation that hasn’t been thought through has been passed, it isn’t the workers who win; it’s the CEOs of whatever companies fall on the right side of the line. After all, the government just ruled their competition illegal, and all those displaced workers will have to go somewhere to earn their scraps.

Uber is not perfect. It could use a more responsive system for incidents of violence, for one (so could taxis). The possibility of regulations that could be tailored to this industry is not unthinkable. These regulations, though, were designed for situations that were completely unlike this. This is like fighting a ground war against a UFO. Everyone’s gonna lose, except maybe the bad guys. Uber (and Lyft, and TaskRabbit, and AirBnB) are voluntary commercial exchanges that, for the most part, people are happy with. They’re popular, low cost, and are a real threat to an industry entrenched in corporate welfare. The sharing economy is new and emergent, and any regulation applied to it would have to be one designed for it, and one that treads lightly — it’s a lot easier to screw up an industry than to fix the screw-up. I haven’t seen any proposals for a regulation like that, and so, in their absence, I have no choice but to stand with Uber. More consumer freedom is better than less, more economic competition is better than less, and more challenges to corrupt industries are better than fewer. Ultimately, this ruling is corporate welfare for the taxi companies. Don’t believe the hype.