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Independent Contractors or Misclassified Employees? The "Uberfication" of the Service Economy

Where have all the Taxis Gone?  

Like it or not, the manner and means of delivering services (and goods) has shifted dramatically in the past few years because of developments in technology, creative insights by entrepreneurs about untapped consumer demands, and economic pressures. What's causing all of these changes and where will they lead?

In 2009, Über was a small San Francisco based start-up with few users. Today, just a few years later, the company has a valuation in excess of $40 billion dollars and a global footprint. Taxis predate the invention of the automobile. Uber doesn't really offer a revolutionary service, does it? Why is the company valuation so high?

It's because Uber is positioned perfectly at the apex of larger shifts in technology and the economy. The company is capitalizing on consumers' demand for pinpoint on demand delivery of a taxi. The basic "offering" of Uber is enhancing consumer control over the process of taking a taxi ride and an immediate pairing of consumer demand and a service. There's a lot of this "convenience" stuff going on now in the economy. Consumer's attention span has decreased to the point where it's impossible for them to wait even a moment or two. We are all suffering from technology ADD. And we're willing to pay a premium to cope with our maladies.

Leveraging technology, clever companies world wide are acting as virtual "middlemen" between consumers and service providers. Other entities that offer similar "uberfication" of services are Axiom, a service that pairs consumers with lawyers, and American Well, a service that offers online medical consultations with a doctor for $49. The list goes on.

So, what's the cause of this shift? Many consumers don't have time. And they don't have patience either. They would rather pay Uber a premium to deliver a "taxi" to their exact location and to take away the hassle of having to pull out the wallet or credit card to pay the driver. Who has time to sit around waiting for a random taxi to drive by? Then, all the waiving, the humiliation of the taxi driving by with an already occupied back seat. These consumers have money to burn. But they don't have time to waste. They are impatient, but who can blame them. We're all under tremendous time pressures and everyone's on the bandwagon.

On the flip side, many workers have been displaced from previously plentiful full time manufacturing and service jobs. These workers have time, but no money. So the recently laid off middle manager offers his time and car, using the Uber middleman, to consumers. Many enjoy the flexibility that the Uber job affords them. They can work when they want. They don't have a boss breathing down their necks, telling them what to do. Uber drivers use their own cars to do the driving. Uber takes its cut. Everybody's happy right?

No so fast. The implications of this shift in the manner of service deliver are enormous and potentially damaging. Uber drivers are not considered to be employees by Uber so they don't have worker's compensation, the right to medical leave, freedom from discrimination and disability insurance and are required to pay more in taxes. Uber is shifting the costs of these benefits to workers and potentially to the taxpayers, who might have to bear the burden of dealing with long-term consequences of this classification. Uber is getting a free ride.

Über was just hit with a $7 million dollar fine in California for not providing data on how many of its customers had special needs and the frequency of rides into economically distressed areas. Taxis are a regulated industry. But Uber is not really a taxi service. It doesn't own a single taxicab after all. Is Uber challenging the boundaries of the law, trying to use it's unique business model to slip by rules and regulations that apply to more traditional businesses?

Are Uber drivers actually employees? The Labor Department just issued guidelines that might suggest that they indeed are. If that's the case, Uber is going to have to bear the burdens that employers do, which generally benefit workers and the public as well. A slew of a cases alleging that Uber is an employer is winding through our court system. If the courts determine that Uber is an employer, the implications would be enormous. (Expect Uber's rates to increase).

What's the future of the traditional workplace where employees report to a central location, share weekend stories in the break room, and gripe about the boss behind their backs? Not all services and be Uberfied. Moreover, even assuming a "tech-takeover," those tech companies will need offices, staff, and an infrastructure. However, the operational footprint of tech companies is much smaller than manufacturing. Facebook has just a few thousand employees worldwide. So, don't expect the tech office jobs to fully replace office jobs lost to technology.

There may still be a future for taxi drivers. Taxi stands in big cities offer an inventory of drivers ready to serve. And airports, hotels, and other venues are well-served by taxi cabs. But the tax industry, and perhaps the service economy as a whole, is moving into unchartered waters.

If you believe you have an employment issue that needs clarification, please contact me at my office. (415) 391-9476. I don't offer mobile legal services and I'm proud of it. I meet with my clients in person, get to know them, and give them personalized service in person. The Law Offices of Daniel Feder opposes the Uberfication of legal services. Some things just can't be "technologized."

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