Megan McArdle on California Declaring Uber Drivers to be Employees

Megan McArdle is one of my favorite writers on the web.  So it was fun to see my recent post on California and Uber drivers get a mention from her.  I just focused on the implications for Uber and its customers, but she goes further to say that the likely results for its drivers will be negative as well, comparing their likely plight to that of freelance writers.

On the face of it, this ruling seems ludicrous. Raise your hand if you've ever had an employer who said: "Hey, as long as you don't actively alienate the customers, you can just show up and work whenever you feel like. No need to let me know when you're coming, just show up and I'll pay you for any work you do. Just put in a couple of hours every six months, m'kay?" Yeah, I never had that job either, and neither did anyone else who wasn't blackmailing the boss or working for a family member.

Not even freelance writers or contract columnists have this job......

Uber has to worry about not just the expense of complying with all these mandates, but also the expense of documenting that it has complied with these mandates -- which will mean more paperwork and hassle for Uber's HR staff and for the drivers themselves. The effect would be to introduce a substantial wedge between what Uber spends to keep a driver on the road and what drivers actually get in their checks. How many people will still be driving when their work starts to be micromanaged and their checks are docked to pay for all the new requirements?

In other words, the possibilities for Uber drivers are probably not "status quo" or "status quo plus paid sick leave"; the possibilities are probably "status quo" or "figure out what to do next because Uber just went out of business." Since economists generally assume that whatever that is, it's a less attractive option than driving for Uber, that's not a happy answer for the driver.

And in fact, these are exactly the complaints we are hearing from freelance writers as more places rely more heavily on staff, because with the economics of the Internet, it makes more sense to manage a small number of staffers than a large number of freelancers. The staffers are happy, because they're working. The freelancers are miserable, however, because here the new version of our old "gig economy" does not support that many people


  1. Trey Tomeny:

    It seems to me that Uber has several decent ways to beat this in the short run and one great way to beat it in the long run:

    1. Short run- Uber can stop having drivers work for them and instead have Uber work for the drivers as a scheduling and payments service.
    2. Short run- Uber drivers already usually work for more than one service at a time, most work for at least Lyft also. This is a strong argument that the drivers are not employees, what company lets their employees work for the competition at the same time?
    3. Short run- Uber can let drivers set their own prices, it will complicate things but not as complicated as model destroying employees.

    4-10. In the long run, Uber is a platform for driverless cars, and those drivers are therefore....non-existent.

  2. gseattle:

    From Uber: "Reuters’ original headline was not accurate. The California Labor Commission’s ruling is non-binding and applies to a single driver."

    Well thank goodness, because otherwise that decision against Uber is anti-American by a judge with roots in a communist culture, Edward Chen. Fire him, he's an embarrassment, a blotch on this nation trying to move toward responsible freedoms.

    We have a right to contract.

    (I have never had any dealings with Uber)

  3. joe:

    Under federal law, the uber driver is definitely an independent contractor. There is vastly too much case law, 20 factor test, section 530 etc to even consider for a second that the drivers are anything but independent contractors. If the IRS attempted to collect payroll taxes on the Uber drivers from Uber, the Uber would likely be entitled to an award for attorney fees under section 7430 since the position of the government was substantially unjustified.

    While I am not an expert on CA employment law (I am a Texas CPA), state law almost always follows federal law with some minor deviations. In this case, the CA labor commissions position is so strongly contrary to established federal law, that even with the quirks of CA labor law, I dont see how they believe they can prevail in their position.

  4. Bruce Zeuli:

    What is lost in this is that San Francisco taxi drivers are independent contractors not employees. So somehow the labor commission is OK with taxi drivers being independent contractors just not Uber drivers. Let's see, Taxi drivers sure look more like employees than Uber drivers. What's up? Oh yeah, Taxi drivers have taxes with held from their pay check (invoice) and Uber drivers do not. It's is always about taxes and control. Uber (well it's customers) will either have to pay enough tribute to make it worth while for the tax collectorsto ignore the pleas of Taxi cartels or Uber will be regulated to the point where it is indistinguishable from a Taxi cartel.

  5. marque2:

    I am not sure if regular Taxi drivers are employees either. My understanding is they rent the cabs from the license owners and do all the driving on their own time. Taxi companies.might have some dispatch capability, but the taxi driver is usually generating his own business on the street.

    If Uner has employees but taxis do not that would be yet another unfair advantage for the taxi companies.