August 3, 2021

Volume XI, Number 215


August 02, 2021

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Part 1 - Uberization of Workplace: Will Radical Innovation Change Face of Employer-Employee Relations?

Have you Ubered? If you haven’t, then you should try it before you weigh in on whether it is a good or bad thing.  At its most basic, Uber is an alternative to calling a cab (and there are progressively pricier and flashier versions of Uber if you prefer to travel in style).  All you do to Uber is download an app to your smartphone, provide your credit card information, and then request a ride.  Uber has conducted background checks and insurance checks on folks who use their personal vehicles to pick you up and take you to your destination.  No cash is exchanged.  The cost of the ride is charged to the credit card on file. Uber has started a revolution in the provision of services through technology.  It identified a consumer need and provided a quick, simple way to satisfy that need by utilizing the technology that we just about always carry with us.  This business model has been applied to a number of consumer needs.  If you want your laundry done or a hard to reach light bulb changed, there’s an app for that.  This concept also has expanded into areas such as elder care, legal services, banking, and real estate.  Not surprisingly, as somewhat of a trailblazer in this area, Uber has found itself defending its business model in a lot of litigation.  What might these lawsuits mean to you?

Drivers v. Uber (Independent Contractor Status):  Some Uber drivers are suing Uber for tips, gas, and other expenses, claiming to be employees rather than independent contractors.  The employee versus independent contractor status battle is of significant importance to employers who use these arrangements, particularly in light of the Wage and Hour Division of the DOL weighing in on the subject this past July in an Administrator’s Interpretation telling the world that most people are employees.  In Uber’s business model, the driver and Uber have a written contract stating that an independent contractor relationship is being created.  The Uber drivers I’ve used operated their personal vehicles, determined their own hours, and received payment by the ride.  Most had a very good working knowledge of their city, but they could fall back upon their smart phones for guidance if they were unfamiliar with their destination.  And, all of them had day jobs.

Drivers v. Uber (Arbitration Clauses):  The drivers challenging the independent contractor status of their relationship with Uber have brought their claims as class actions.  One of the defenses used by Uber in opposing class status has been the arbitration clauses found in the contracts it uses.  Early renditions of the clause were found unconscionable under California law, while later ones have been found contrary to California public policy – an important distinction as these cases are pending in California, where Uber is based (San Francisco specifically).  Regardless of the jurisdiction, there are lessons to be learned from this litigation by employers who may want to use these clauses.

District Attorneys v. Uber (Background Checks):  Uber’s background check practices have also been under scrutiny.  While this challenge also started in California, it has been carried on across the nation as the rallying cry of taxi companies, drivers, and lobbyists wanting to knock out the competition.  According to detractors, the transportation industry as a whole is subject to stricter background checking practices than those used by Uber – which denominates itself as a technology company, not a transportation company (more on that later).  More forward-thinking legislatures and other governmental entities are finding ways to address safety concerns while still embracing the innovation and convenience of the gig economy.

What’s in a name?

Ah, yes.  Gig economy.  On demand economy.  1099 economy.  Sharing economy.  Freelance economy.  Call it what you will, but the new mode of business combines technology with consumer needs.  While Uber is taking it to the mat, it’s not the only company that may be impacted by the legal decisions being made in California.  Lyft is another driver business in the gig economy.  TaskRabbit, with the press of an icon, matches clients with “Taskers” who are skilled in the task needed by the client.  Need your closet organized?  Want someone to stand in line for you?  TaskRabbit can connect you.  So can Handy – when you need furniture assembled, your house cleaned, or electrical work done.  DogVacay sets you up with a petsitter near you who will send you daily photo updates on your four-legged friend.

That’s not all.  What about people offering their personal property for rent?  Airbnb allows folks to rent their vacation homes, spare bedrooms, or other empty spaces in 34,000 cities and 190 countries.  Got an extra car?  You can offer it on RelayRides or Getaround.  You can even rent out your bikes, surfing, and skiing equipment through Spinlister.  My point in naming these services and their offerings is not to give them a cheap plug.  It’s to make a point: with 80 million Millennials in a country of 300 million people, the sharing/gig/etc. economy is likely to stick around, requiring governments, laws, and other businesses to make changes to keep up with the times.  This tends to be a very sticky proposition in the lawmaking arena where the lag tends to be the longest.

How does this affect me? 

I’ll begin that answer by telling you how it could affect yours truly.  In my profession, there is a trend toward unbundling legal services through online legal providers.  Of course, there is an app for that, too – matching consumer needs to attorneys who can meet those needs.  While this arrangement won’t likely work as well for litigation purposes, lawyers may find themselves having to change with the times so that their offerings are more easily accessible – say with the touch of a button?

Elder care is also trending towards uberization.  CareBuddy matches elderly users with “Care Buddies” who can get them to doctor appointments, pick up prescriptions, and assist with daily living activities, among other things.  Senior living centers, much like the legal industry, are unbundling services for those who do not need – and do not want to pay for – assistance with laundry, driving, and other services typically included in the monthly bill.  Another service matches college students and other individuals needing housing with elderly users who have an extra room and need care-giving services in exchange.  While some of these may not sound like the greatest of ideas, the point is that people are attempting to innovate and find that niche where supply meets demand using technology.  Uber does this brilliantly with its surge pricing concept.  When the demand for rides is greater, Uber ups the cost of a ride, bringing out more drivers and lessening wait times.  This concept is being applied to dining and traffic to control peak times too.

The uberization of banking is another area the idea is taking hold, and in this field, it’s fascinating.  I’ve found signed checks lying around the house or in the car because my Millennial simply takes a picture of the front and back of his checks and, through the magic of technology, sends it to his bank where it is credited to his account.  Apps have also made peer-to-peer lending a reality.

Finally, let’s briefly consider health care.  As patients, we are becoming more informed through technology. Our doctors now allow us into parts of our patient records.  They email with us and even do medical consultations over video-conferencing.  Our Fitbits tell us about our sleep and our activity levels.  And, I would bet there’s hardly one among us who cannot navigate WebMD.  With all of this information available to us, as well as an aging population, we will surely begin seeing the uberization of health care.  While it hasn’t happened in earnest yet, all of the signs are there.

Where does this lead us?

Certainly, I cannot say for sure where the chips may land on this table.  However, I can and will focus more on three particular legal issues surrounding this business model which Uber has effectively teed up for potential far-reaching impact.  The first issue I will examine concerns the independent contractor debate.  The second issue I will look at is the use of arbitration agreements for “employment” related claims.  The final installment in this series will look at the background check issue and how governments are dealing with it.  All were briefly highlighted above but have many additional layers worth analyzing.

This post is part one of a six part series on the impact the Uber business model is having on employment laws across the nation.

© Steptoe & Johnson PLLC. All Rights Reserved.National Law Review, Volume VI, Number 27

About this Author

Vanessa L. Towarnicky, Attorney, Labor, Employment, Steptoe Johnson Law Firm
Of Counsel

Vanessa Towarnicky's primary focus is in the area of labor and employment law. She has been involved in representing clients in various employment cases, including sexual harassment; deliberate intent; age, race, and disability discrimination; wrongful discharge; and various other employment-related torts. She is admitted to various state and federal courts as well as the Third Circuit Court of Appeals and Fourth Circuit Court of Appeals.

Ms. Towarnicky provides guidance to clients with regard to compliance issues arising under state and federal employment laws, including FMLA, ADA...