[California] Uber Overhauls Procedures To Insulate Itself Against AB5

14 FEB 2020

In a reaction to California’s new gig-work law coming into effect on January 1, Uber is overhauling its ride-hailing procedures to insulate itself from having drivers reclassified as employees under AB5, San Francisco Chronicle reports.

However, lawyers have reportedly found big gaps in its approach.

As part of the changes, Uber gave drivers increased freedom and flexibility, letting them see information on ride destinations and estimated fare upfront and giving them the option to reject trips without penalties. The firm is now letting riders pick favourite drivers for scheduled rides and trialling a way for drivers to set prices at three small California airports. (Link via original reporting)

Under AB5 and Dynamex - the 2018 California Supreme Court decision it codifies - workers are presumed to be employees unless they (A) work free from a company’s control, (B) do work that is not central to a company’s mission, and (C) have independent enterprises doing that type of work. (Link via original reporting)

'Uber’s revamp addresses only the 'A' part of the ABC test, trying to show that the drivers are free of company control and direction,' said John Baum - a partner at San Francisco’s Hirschfeld Kraemer  - who represents management in labour cases.

Hiba Hafiz - assistant professor of law at Boston College - agrees, 'The changes wouldn’t move the needle...under the B and C prongs of the ABC test - they really just go to whether or not a court would likely find that Uber does not control and direct the performance of drivers’ work,' she said.

Tiffanny Brosnan - a lawyer at Snell & Wilmer in Costa Mesa (Orange County) - who represents management in labour cases, believes addressing the first prong 'is still critical when it comes to how federal agencies such as the Department of Labor and the IRS view independent contractors.'

For Part C, drivers who work for other services, such as Lyft, DoorDash and Postmates, potentially could be considered to have independent businesses in the same field, Baum said. However, many drivers, especially those who work close to full time, stick with one service because Uber and Lyft incentives are tied to completing a certain number of trips in a fixed time period.

Mr Baum said he could envision Uber changing its business model to require that drivers do similar work for other entities. That might also mean changing its incentives structure.

Ms Brosnan noted that Uber highlighted in a recent blog post that drivers are free to work on other platforms at the same time. 'That’s because if you have a driver who drives passengers for Uber and Lyft who also delivers food for Postmates, it’s easier to argue that driver has an independently established business,' she said.

Part B of the test still remains, and Baum, Hafiz, Brosnan and many other lawyers state that this will be the hardest part for Uber to prove.

'It’s been dubbed the ‘Killer B’ for good reason,' Mr Brosnan said.

In a statement, Uber said that its changes are designed 'to preserve flexible work for tens of thousands of California drivers,' adding that the pricing tests 'would give drivers more control over the rates they charge riders.'

Uber maintains that drivers are not central to its core business because it is not a transportation company. Instead, it is 'a technology platform for several different types of digital marketplaces,' Tony West, Uber chief legal officer, said in a September media call.

Mr Baum believes that few would believe such reasoning, 'Everyone views Uber’s core business as giving rides,' he said. 'It pairs you with a driver to go from Point A to B.'