The California Labor Commission recently ruled (read full ruling below) that Barbara Ann Berwick, a former Uber driver, should be classified as an employee, not an independent contractor.
As a result, the on-demand company has to pay her $4,152.20 in business expenses for time she worked as an Uber driver in 2014.
This is a move that could drastically reduce the profitability of Uber, a fast-growing startup that has a $40 billion valuation. And it also could be another boost for self-driving cars, which have been on Uber’s radar for some time.
Uber is adding hundreds of thousands of drivers around the world each month, and having to offer salaries, health insurance and other benefits could be a huge roadblock for the company. At of the end of 2014, Uber employed 160,000-plus drivers.
Self-driving taxis would certainly eliminate the company’s top expense.
“With a business model based on offering affordable fares, these companies may not be able to survive a ruling against them in this area,” argued Jennifer Robles of Owen Dunn Insurance. “Without contractor status, it’s likely these companies could not continue at a profit, leaving traditional taxi drivers decidedly happier and thousands of Lyft and Uber drivers out of work.”
According the National Employment Law Project (NELP), a workers’ rights group, the change from contractor to employee could amount to an extra 30 percent in labor costs. “Uber has had many bumps along its road, but this one is a genuine roadblock,” said Forrester analyst James McQuivey. “The entire model depends on fluid labor — some will say exploiting labor, others will say liberating it. In the end, it only matters what the regulators say, and they have spoken, at least for now.”
The battle is far from over. Uber will most likely appeal this decision. In a statement, Uber said the same California commission had ruled in its favor two years earlier and that today’s ruling was non-binding. It also pointed out that the commission’s ruling was confined to the single driver who filed suit.
Uber must have known this decision was coming. And maybe that’s why it recently raided the robotics department at Carnegie Mellon University (CMU), recruiting some 40 researchers to come work at Uber to develop self-driving taxis. Ironically, in February 2015 CMU and Uber announced a self-driving taxi partnership to take on Google, which is creating its own ride-sharing service to compete directly with Uber.
But clearly Uber had a change of heart. Uber even hired former Google head of mapping Brian McClendon to lead its Advanced Technologies Center. McClendon is known for co-founding the startup that eventually became Google Earth before making Google Maps what it is today.
Uber has also been seeking to team up with Baidu Technologies Inc. and Apax Partners to pursue Nokia Oyj’s map business.
The Pittsburgh Business Times spotted an Uber test car with a rotating device on top that resembled a LIDAR sensor that would be used to map its surroundings. Uber, however, said “this is not a self-driving test car. This vehicle is part of our early research efforts regarding mapping, safety and autonomy systems.”
For Uber, self-driving cars can’t get here soon enough.