New startups are all seeking the label of disruptor. They want to portray themselves as revolutionary pioneers, blasting apart tired industries that have become riddled with vested interests. They’re taking the power back from moustache-twiddling profiteers and giving it to the consumer.
At their best, disruptors not only provide an alternative, they force traditional firms to adapt and compete to provide better value for the consumer. At their worst, they hide behind the tag and make their profit not necessarily by taking advantage of customers, but by exploiting employees and swerving regulation instead. Which is not really any better.
A recent court ruling in California has cast further doubt on which of these camps Uber falls into. The California labor commissioner has declared that the ride-sharing company’s drivers are employees as opposed to contractors, arguing that this is because Uber is ‘involved in every aspect of the operation’. Uber are appealing the decision.
The implications of the ruling are potentially substantial, most importantly in that they throw a bit of a grenade in Uber’s claims that it is just a marketplace rather than a transport operator. The ruling could see Uber forced to take responsibility for employees’ health insurance and various employer taxes, incurring large costs they previously didn’t face. It should be noted, however, that investors do not believe that the decision will have a significant impact on the firm’s valuation. When Uber was a smaller company, it required a more flexible work force, and contractors cater for such needs. Now it is larger, however, it has more predictable demand for its service and can benefit from having employees scheduled to work regular shifts.
Uber’s ability to avoid regulation has long been a concern, one loudly voiced by taxi firms who feel that doing so is an unfair competitive advantage. This is hard to argue against. Conditions for Uber’s employees at the moment are also notoriously fraught, as a result of both their freelance status and Uber’s ratings system. If a driver’s ranking - something which may force a better service, but can be hit by the whims of spiteful consumers - falls below 4.6 they are simply deactivated. They have none of the rights of a normal employee who is removed from his role - no tribunal, no right to appeal, no severance package. They are simply terminated.
This is not an issue exclusive to Uber though, but one faced by all freelancers, who are limited in their rights compared to employees. As the nature of employment shifts, with technology enabling people to work remotely and turning to freelance and entrepreneurial means of making money, it may be worth updating employee rights. Freelancers are also compensated in other ways, which is why many choose such employment, enjoying the advantages of the flexible hours they work and often higher pay.
Industry disruption is too often painted as a moral crusade. The idea of traditional industries as profit gougers, charging as high a price as possible simply because there’s no other competition, is often fallacious. Most are more expensive because the means they have of providing their product or service are less cost efficient than their disruptors. Uber has an extremely slick app, and it is undeniably better for the consumer, both in ease of use and cost. Its App is a better way of running a taxi service than what is currently available, and it doesn’t necessarily need to flaunt regulation as it once did to best the competition.
What the California ruling means for Uber is as yet unclear, but with a valuation topping $40 billion, it can afford to treat its drivers well. The UK Government is keen to promote sharing platforms, which appear to many to be the future, and it is looking for the UK to become a incubator for ‘sharing platforms’. To the extent that they launched an independent review into how to help them grow, albeit one run by Debbie Woskow, Chief Executive of sharing platform Love Home Swap. As the sector grows, the benefits they afford the consumer mean it is important that they are not discouraged, but it is also important that employees are not trampled underfoot.