Either of them would work. At least one of them is needed. And one of them might be more likely to survive a change of government.
But first, the problem.
Uber drivers have always been considered contractors. Drivers pick and choose the times they’d like to work. They can choose any fare or none while logged in. They can even be logged into multiple apps simultaneously, choosing whichever fare seems most promising across the set of platforms. While it is unclear what proportion of drivers take up that opportunity, rides where the driver’s expected time of arrival stretches out may well be cases where the driver is finishing a run that Uber does not know about.
The Court of Appeal said that the four drivers are actually employees. About 900 of Uber’s approximately 6,500 other drivers (total driver figures from 2019 reports) also want to be considered employees.
Regardless of anything else in the relationship between Uber and its drivers, deeming these drivers to be employees rather than contractors makes the entire Uber model impracticable. The change will be detrimental for drivers and riders who prefer the current model
Think about it.
If you are a driver with multiple driving platforms open, which app is your employer? The one considered your employer will be responsible for paying at least the minimum wage and will have responsibilities for sick leave and holidays. That one might understandably object to your picking up fares on other apps while on their clock.
The contracting relationship enables drivers to keep the app open at home while watching a movie. If they notice a surge in pricing that makes it worth getting off the couch, they can do so. Indeed, it’s part of the point of surge pricing. When there is a surge in demand, higher fares encourage more drivers to jump in their cars.
But if you are deemed an employee, on-call provisions could apply. Uber could be required to pay you for being on standby. And so could any other app that you have open. While it sounds great to be paid by multiple employers while sitting at home on a Friday evening, no employer will be willing to pay you to do that, as a matter of course.
The flexibility in hours would disappear. Drivers would be on rostered shifts instead, required to take fares presented rather than having choice. They would be barred from operating on multiple platforms at the same time, but doing so sequentially on different shifts could be an option.
It would not be helpful for drivers who chose Uber rather than a traditional cab company or other employment for its flexibility.
It would also be unhelpful for riders. Drivers on rostered shifts would mean higher ride costs, longer waits, or both.
Features of Uber’s platform, like surge pricing, rating mechanisms, and minimum driver standards make for a better experience for riders and drivers. Those features that encouraged riders to use the platform in the first place were part of the reason that the Court decided Uber was an employer.
The decision could go well beyond Uber. For example, drivers who own large transport trucks and contract to haul freight for a freight logistics company may also be deemed employees rather than contractors.
If the Court is right about the law, and it’s more likely to be right about it than I am, then the law is wrong. It makes it impossible to operate models that make both drivers and riders better off. Drivers who prefer an employment arrangement rather than contracting already have an obvious option: send a CV to a traditional taxicab company.
The government will have to legislate around this mess.
The government could set a new category into employment law for platform workers so companies could offer benefits without fear of workers being deemed employees, and so workers could maintain valuable flexibility. However, any new set of boundaries between categories will bring its own future challenges.
Alternatively, it could liberalise employment law more broadly. If Uber and its drivers agree that they are in a contracting relationship and nobody is forcing drivers to work with Uber, the courts could be required to recognise voluntary agreements among consenting adults. That approach would be flexible against changes in real-world circumstances, but more at risk of changes in government.
Perhaps the safest option would be a combination of the two. A broadly workable category for platform workers combined with the ability to contract voluntarily could preserve the former against future governments opposed to the latter.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE
The Court of Appeal said that the four drivers are actually employees. About 900 of Uber’s approximately 6,500 other drivers (total driver figures from 2019 reports) also want to be considered employees.
Regardless of anything else in the relationship between Uber and its drivers, deeming these drivers to be employees rather than contractors makes the entire Uber model impracticable. The change will be detrimental for drivers and riders who prefer the current model
Think about it.
If you are a driver with multiple driving platforms open, which app is your employer? The one considered your employer will be responsible for paying at least the minimum wage and will have responsibilities for sick leave and holidays. That one might understandably object to your picking up fares on other apps while on their clock.
The contracting relationship enables drivers to keep the app open at home while watching a movie. If they notice a surge in pricing that makes it worth getting off the couch, they can do so. Indeed, it’s part of the point of surge pricing. When there is a surge in demand, higher fares encourage more drivers to jump in their cars.
But if you are deemed an employee, on-call provisions could apply. Uber could be required to pay you for being on standby. And so could any other app that you have open. While it sounds great to be paid by multiple employers while sitting at home on a Friday evening, no employer will be willing to pay you to do that, as a matter of course.
The flexibility in hours would disappear. Drivers would be on rostered shifts instead, required to take fares presented rather than having choice. They would be barred from operating on multiple platforms at the same time, but doing so sequentially on different shifts could be an option.
It would not be helpful for drivers who chose Uber rather than a traditional cab company or other employment for its flexibility.
It would also be unhelpful for riders. Drivers on rostered shifts would mean higher ride costs, longer waits, or both.
Features of Uber’s platform, like surge pricing, rating mechanisms, and minimum driver standards make for a better experience for riders and drivers. Those features that encouraged riders to use the platform in the first place were part of the reason that the Court decided Uber was an employer.
The decision could go well beyond Uber. For example, drivers who own large transport trucks and contract to haul freight for a freight logistics company may also be deemed employees rather than contractors.
If the Court is right about the law, and it’s more likely to be right about it than I am, then the law is wrong. It makes it impossible to operate models that make both drivers and riders better off. Drivers who prefer an employment arrangement rather than contracting already have an obvious option: send a CV to a traditional taxicab company.
The government will have to legislate around this mess.
The government could set a new category into employment law for platform workers so companies could offer benefits without fear of workers being deemed employees, and so workers could maintain valuable flexibility. However, any new set of boundaries between categories will bring its own future challenges.
Alternatively, it could liberalise employment law more broadly. If Uber and its drivers agree that they are in a contracting relationship and nobody is forcing drivers to work with Uber, the courts could be required to recognise voluntary agreements among consenting adults. That approach would be flexible against changes in real-world circumstances, but more at risk of changes in government.
Perhaps the safest option would be a combination of the two. A broadly workable category for platform workers combined with the ability to contract voluntarily could preserve the former against future governments opposed to the latter.
Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE
1 comment:
New Zealand employment laws are already suffocating enough, so no surprises that the courts want to pile in too; a virtual signal in need of a problem. Further to this idea of Eric Crampton’s above, I would love to see a system where all employees are contractors and responsible for their own PAYE and holiday pay, sick days and retirement savings. Where every single person that works for a living has to physically work out and pay a quarter of their paycheque to the IRD every week. Maybe then we might foster a citizenry that begins to ask more questions of their politicians and representatives and just what in the hell they’re doing with all of this money? What a world that could be!
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