Uber’s unprecedented success and meteoric rise has, at times, led them into uncharted territory. At a valuation of about $62 billion, the company is looking to raise another $600 million this year, and reported $2.5 billion in revenue for the first quarter of 2018. The company’s success has been tainted by serious legal controversy, however.
Regulatory authorities are concerned about unreported data breaches and Uber’s organizational reputation for sexual discrimination. However, most legal issues and serious social push-back against Uber has been focussed on one particular controversy: “are Uber drivers employees?”
When it comes to this particular controversy, the City of London (more specifically, its transport authority – Transport for London, or TfL) has led the charge. In September of 2017 they revoked Uber’s operating license in London. In large part, that decision was driven by TfL’s determination that Uber drivers were employees and not, as Uber maintained, independent self-employed contractors. It turns out that this distinction makes a world of difference.
TfL’s Revocation of Uber’s Operating License
TfL refused to renew Uber’s operating license for several reasons, many of them stemming from Uber’s treatment of its drivers as independent contractors and not employees. This stance allowed the company to refrain from acting proactively (or even from acting at all) in a range of cases. In particular, TfL referred to:
Uber’s reluctance to report serious criminal offences
Uber’s negligent approach to how medical certificates were obtained
Uber’s carelessness in its background checks of drivers
Uber’s reluctance to share data with, and allow app access to, regulatory bodies
Many of these problems resulted directly from Uber’s treatment of its drivers: they distanced themselves from any responsibility for the drivers’ wellbeing and safety, as well as any responsibility for actions by drivers that could threaten the wellbeing and safety of passengers.
Although Uber’s dilemma is on a grand scale due to its size and disruptive effect on the market, many companies make the mistake of treating workers as independent contractors when they are, in fact, employees. The employee-employer relationship is not determined by the name that relationship is given in the contract. It is determined by the substance of the relationship. In legal parlance: substance over form, always. Uber learned that the hard way in London.
Uber was initially defiant about the actions of TfL, but has since turned a new leaf, and its strategy has since been one of charm and compliance. The company publicly admitted that it had been wrong in how it treated drivers and passengers, replaced many of its London leadership, and changed many of its practices.
This has paid off, at least for now: London recently granted Uber a temporary license to operate in the city. In return, Uber agreed to extensive government oversight of its operations in the city. The license has only been granted for 15 months, however (usually, licenses are granted for 5 year periods). Uber is not out of the woods yet, but they seem on their way to recovering public trust. And they have taught the rest of the startup world a lesson: being disruptive is a good thing, as long as you are not destructive.
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