{"id":650,"date":"2015-10-06T14:46:11","date_gmt":"2015-10-06T18:46:11","guid":{"rendered":"https:\/\/www2.law.temple.edu\/10q\/?p=650"},"modified":"2015-10-06T14:46:11","modified_gmt":"2015-10-06T18:46:11","slug":"the-uber-problem","status":"publish","type":"post","link":"https:\/\/law.temple.edu\/10q\/the-uber-problem\/","title":{"rendered":"The Uber Problem"},"content":{"rendered":"

The so-called \u201cride sharing\u201d service Uber has grown dramatically over the last few years. The company\u2019s business model is actually quite simple: its smartphone-based app connects drivers offering rides and passengers seeking them, passengers pay mileage-based fees through credit cards that the company keeps on file, and Uber then takes a percentage of each fare and gives the rest to drivers.<\/p>\n

At least part of the company\u2019s success relies on its dramatic reduction of search costs and exploitation of network effects among users and drivers. Because Uber drivers are linked more-or-less instantly to riders, they may have paid passengers a greater proportion of the time than traditional cabs. But the company also tends to violate taxi regulations wherever it opens up shop, leading to significant tensions with taxi drivers who have lost business as a result.<\/p>\n

In two recent essays\u2014one in a symposium<\/a> for the University of Chicago Law Review, another forthcoming<\/a> in the Harvard Law & Policy Review\u2014I considered the costs and benefits of Uber\u2019s rise. I argue that many common criticisms of Uber aren\u2019t clearly grounded in fact, and that others beg important questions about what sorts of regulations are appropriate. But I also argue that the company ought to be held to basic employment law duties.<\/p>\n

Of course, I don\u2019t think much of the criticism of Uber is really based on safety anyway. Rather, it is based on the company\u2019s impact on taxi drivers\u2019 and its own drivers\u2019 ability to make a living. That is a serious and legitimate concern, and one that markets tend to exacerbate rather than solve.<\/p><\/blockquote>\n

The question of whether Uber should be legalized in Philadelphia illustrates these questions well. In January, the Pennsylvania Public Utility Commission granted the company a two-year provisional license. But that grant carved out Philadelphia, where the Parking Authority (PPA) regulates taxis and limousines and holds that UberX, the company\u2019s low-cost and most popular service, is illegal. By its own account, the PPA has impounded \u201cdozens\u201d of UberX drivers\u2019 cars, and recently filed suit seeking at least $300,000 in damages. As PPA Executive Director Vince Fenerty stated, \u201cUnlike the 1,600 licensed medallion cabs in the city, there is no guarantee these cars are clean, safe, inspected or insured. The drivers have no training and have not gone through extensive driving or criminal background checks.\u201d<\/p>\n

There are sound reasons to regulate Uber, but Fenerty\u2019s criticisms miss the mark. For example, do Uber drivers really cause more accidents than taxis? I have seen no data on this question, nor do I expect it exists given the company\u2019s relative youth. The Uber accidents that do occur probably get greater attention than comparable accidents by taxis since Uber remains a novelty, and its critics have incentives to highlight its missteps. Uber also requires its drivers to use relatively new vehicles, and newer cars tend to be safer. Regarding both accidents and vehicle safety, moreover, why do we think that inspections by an admittedly underfunded state agency are the best means of ensuring compliance? This is the sort of problem for which insurance markets tend to work, especially since Uber riders will likely abandon the service if a slew of accident victims go uncompensated.<\/p>\n

Criminal background checks also raise difficult issues. Of course, the rate of passenger assaults by drivers would ideally be zero. But how to get there? As the EEOC has and various courts have noted, stringent criminal background checks tend to screen out racial minorities at a disproportionate rate. In a leading case, the Third Circuit held that under Title VII, SEPTA could only use criminal background checks that \u201caccurately distinguish between applicants [who] pose an unacceptable level of risk and those [who] do not.\u201d Simply screening out everyone with a criminal conviction would undermine drivers\u2019 interests in equal treatment.<\/p>\n

Of course, I don\u2019t think much of the criticism of Uber is really based on safety anyway. Rather, it is based on the company\u2019s impact on taxi drivers\u2019 and its own drivers\u2019 ability to make a living. That is a serious and legitimate concern, and one that markets tend to exacerbate rather than solve.<\/p>\n

Regarding taxi drivers, the company\u2019s entry into their markets is unfair insofar as it does not follow the same regulations, leaving taxi drivers with substantially higher operating costs. Regarding its own drivers, the company is now defending various lawsuits in which drivers allege that it misclassified them as \u201cindependent contractors\u201d rather than employees to avoid duties including minimum wage and maximum hour protections and work-related reimbursements. Employment status might also entitle workers to workers compensation and unemployment insurance, and potentially even collective bargaining rights.<\/p>\n

Unfortunately, litigation won\u2019t resolve these questions anytime soon, because the existing tests for employment don\u2019t clearly contemplate companies like Uber. As a federal judge stated in a recent case against Lyft, another \u201cride-sharing\u201d company with the same basic business model, the jury will be \u201chanded a square peg and asked to choose between two round holes.\u201d Such drivers are not classic independent contractors since they are actually at the core of the company\u2019s business, often work for it for years, and must follow detailed specifications for their work. Yet they are not classic employees either. \u201cWe generally understand an employee to be someone who works under the direction of a supervisor,\u201d he wrote, \u201cfor an extended or indefinite period of time, with fairly regular hours, receiving most or all of his income from that employer.\u201d<\/p>\n

This suggests a basic tradeoff: the state legislature could legalize Uber statewide, but in the process define Uber drivers as the company\u2019s employees under state law. That would go a long way toward ensuring decent treatment for Uber\u2019s drivers and eliminating unfair competition against taxi drivers. The legislature might also update taxi regulations at the same time to eliminate those that add unnecessary costs, and to better enable taxis to compete against Uber. This would also help set a template for regulation of Uber going forward: the right to operate under a more modern regulatory apparatus, in exchange for commitments to decent pay and working conditions.<\/p>\n","protected":false},"excerpt":{"rendered":"

The so-called \u201cride sharing\u201d service Uber has grown dramatically over the last few years. The company\u2019s business model is actually quite simple: its smartphone-based app connects drivers offering rides and passengers seeking them, passengers pay mileage-based fees through credit cards that the company keeps on file, and Uber then takes a percentage of each fare<\/p>\n","protected":false},"author":5,"featured_media":652,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[70,38],"tags":[87,88,89],"coauthors":[86],"class_list":["post-650","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-labor-and-employment","category-regulated-industries","tag-labor-law","tag-ride-sharing","tag-uber","masonry-post","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"yoast_head":"\nThe Uber Problem - The Temple 10-Q<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/law.temple.edu\/10q\/the-uber-problem\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Uber Problem - The Temple 10-Q\" \/>\n<meta property=\"og:description\" content=\"The so-called \u201cride sharing\u201d service Uber has grown dramatically over the last few years. The company\u2019s business model is actually quite simple: its smartphone-based app connects drivers offering rides and passengers seeking them, passengers pay mileage-based fees through credit cards that the company keeps on file, and Uber then takes a percentage of each fare\" \/>\n<meta property=\"og:url\" content=\"https:\/\/law.temple.edu\/10q\/the-uber-problem\/\" \/>\n<meta property=\"og:site_name\" content=\"The Temple 10-Q\" \/>\n<meta property=\"article:published_time\" content=\"2015-10-06T18:46:11+00:00\" \/>\n<meta name=\"author\" content=\"Brishen Rogers\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Brishen Rogers\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/law.temple.edu\/10q\/the-uber-problem\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/law.temple.edu\/10q\/the-uber-problem\/\"},\"author\":{\"name\":\"Books Schatschneider\",\"@id\":\"https:\/\/law.temple.edu\/10q\/#\/schema\/person\/23e7012f0cf133dbeb0e76693c9e0154\"},\"headline\":\"The Uber Problem\",\"datePublished\":\"2015-10-06T18:46:11+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/law.temple.edu\/10q\/the-uber-problem\/\"},\"wordCount\":1029,\"commentCount\":5,\"image\":{\"@id\":\"https:\/\/law.temple.edu\/10q\/the-uber-problem\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/law.temple.edu\/10q\/wp-content\/uploads\/sites\/12\/2015\/10\/Uber-and-Taxis.png\",\"keywords\":[\"Labor Law\",\"ride-sharing\",\"Uber\"],\"articleSection\":[\"Labor and Employment\",\"Regulated Industries\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/law.temple.edu\/10q\/the-uber-problem\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/law.temple.edu\/10q\/the-uber-problem\/\",\"url\":\"https:\/\/law.temple.edu\/10q\/the-uber-problem\/\",\"name\":\"The Uber Problem - 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