US: California ruling threatening Uber’s business model image

According to a new ruling by the Californian labor commissioner, Uber Technologies must consider any of its drivers that connect with customers via the company’s custom application as an employee.

The decision could have ample effects over the technology company’s business model, with San Francisco-based Uber, just like any other “sharing economy” startups, aiming to have a flexible auto fleet driven by people it calls independent contractors. Treating the drivers as employees would mean the company would be compelled to deliver a minimum wage, offer mileage compensations and pay their social security fees. “We see this as a problem that’s growing larger with each year, with employees lacking security and even basic rights when they are treated as independent contractors,” comments Steve Smith, spokesman for the California Labor Federation. The official has been a proponent of tougher restrictions and rules for emerging ridesharing companies.

Uber, which is widely considered as one of the initiators of the car-sharing business, has been plagued with issues, as regulators from Houston to Berlin have clashed with the company on various motifs – from whether they should get taxi licenses to how it handles travel data. With the company only a little over half a decade old, chief executive officer Travis Kalanick has said at the beginning of the month the service uses 22,000 drivers in San Francisco, 26,000 in New York and around 15,000 in London – to name just a few locations. Both Uber and competitor Lyft Inc. have been slapped with federal lawsuits on whether the drivers should eb given the legal protection awarded to any normal employee.

Via Bloomberg