'Good citizen' Uber wants a regulatory Better Deal in Europe - but a better deal for who?

Profile picture for user slauchlan By Stuart Lauchlan March 3, 2021 Audio mode
Summary:
We must all work together to build A Better Deal, says Uber CEO Dara Khosrowshahi, but will Europe be as willing to listen as Californian voters were?

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Having lost a crucial legal battle in the UK, will Uber’s attempts to get in the driving seat when it comes to the European Union’s latest regulatory review steer things in the right direction? 

Last month the UK Supreme Court upheld a ruling that Uber drivers should be classed as workers, not independent contractors, and as such are entitled to minimum wage, holiday and sick pay, and rest breaks. It was the final stage of a five year legal battle and one that sees Uber looking at the possibility of a wave of compensation claims. 

The firm has been down similar roads before, albeit in a different direction in California last year when voters backed Proposition 22 on the ballot, which allowed the likes of Uber to be exempt from state legislation requiring drivers to be treated as employees. This is now subject to appeal from drivers groups, so that fight goes on. 

And now in the European Union (EU), the European Commission (EC) has kicked off a wide ranging review of the gig economy, noting in its documentation that:

Digitalisation facilitates new flexible work arrangements, such as those in the platform economy, by breaking down many of the space, time and organisational boundaries to working, and offering more options in terms of work-life balance and of when and where to work. However, certain types of platform work are associated with precarious working conditions, reflected in a lack of transparency and predictability of contractual arrangements, health and safety challenges and inadequate access to social protection. 

The questions around employment status of people working through platforms impact their working conditions. Today most of these people are classified as self-employed. While the self-employed status may be a matter of free choice and preference for some, it may represent a lack of choice or pose problems for others, since people with this status may be subject to control and vulnerabilities similar to workers, albeit without the same degree of protection guaranteed to the latter.

There’s a lot at stake here in terms as this review will set the groundwork for how the bloc regulates companies in this space as a whole, rather than leaving it up to individual member states to put in place their own regimes. Publishing the first stage consultation of the review, Nicolas Schmit, Commissioner for Jobs and Social Rights, said: 

In the midst of the digital transition, we cannot lose sight of the basic principles of our European social model. We should make the most of the job creating potential that comes with digital labour platforms, while ensuring dignity, respect and protection for the people that work through them.”

In a bid to get ahead of the curve here, Uber has come up with a white paper -  A Better Deal - full of corporate lobbying ‘useful’ suggestions for EU competition chief Margrethe Vestager and her colleagues to take on board.

In it, Uber says it wants to take “an honest look at how our platform has benefited independent workers - and importantly how it hasn’t - and to commit to doing more and going much further.”

Change is possible, says Uber CEO Dara Khosrowshahi, but it needs to be “grounded in the principles drivers and couriers say are most important to them: flexibility and control over when and where they want to work, earning a decent wage, access to relevant benefits and protections, and meaningful representation”.

A lot of work goes into pitching Uber as a ‘good guy’ when it comes to its social responsibilities in Europe, citing COVID crisis support for transporting “tens of thousands of health workers while public transport services were reduced or suspended”, for example. Then there’s its Partner Protection insurance scheme for drivers, launched in collaboration with AXA, or its work with the Open University in the UK to provide free access to online learning.

Uber is a good citizen, is the underlying message, a good European citizen at that: 

We  care  deeply  about  the  people  who  choose  to   partner with us, and we want to do more, and go much  further on the issues that matter to them.

There is, of course, a sting in the tail as the white paper goes on to question whether a uniform regime across the EU is a viable approach, as Khosrowshahi states:

A one-size-fits-all approach isn’t suitable across Europe. Better protections and benefits for platform work will be different from country to country.

Good luck with that argument when presented to an arch-federalist like Vestager...

Intentions 

For his part, Khosrowshahi expanded on his views on the challenges Uber faces from regulatory moves around the world when he took part in this week’s Morgan Stanley Technology, Media and Telecom Conference, setting out his case that any such moves have to be essentially ‘driver-first’ in nature: 

I think that we won Prop 22 [in California] because ultimately the voters listened to drivers and drivers overwhelmingly, whether they are drivers and couriers in the US or Europe or any place that we operate in, value flexibility as number one. That is why they come to our platforms. The flexibility is unbeatable…What’s become very clear to us is that drivers and couriers want to retain flexibility. 

He insisted that Uber does want to create “earnings opportunities that are fair and transparent and as consistent as they can be”, along with other benefits such as time off or health care, even though that might hurt its profits in the short term: 

Long-term it creates an environment where we can really build a business where our drivers and couriers are satisfied and happy with the various benefits that they are getting, number one being flexible. I do think that the path forward for us is clear. 

And Uber will continue to engage with regulators, he added:

We're going to keep pushing this. I do think it's important to have a level playing field where all of the various platforms, the gig platforms essentially have to operate by the same rules, so that the changes that we're making are lasting. And I think it's entirely appropriate for regulators to be a big part of what the solution is going forward. So we're leaning in. We've been a leader in the field and hopefully California is just the beginning.

It’s in Uber’s interests to get regulatory concerns resolved so as to ensure continuity of operations. The firm has been a beneficiary of the pandemic as other tranches of public transport closed down or were avoided for health and safety reasons. As the Vaccine Economy kicks in, it remains to be seen if that will survive, but Khosrowshahi says the early signs are that it will: 

We've absolutely seen an influx of new riders and that influx looks like it's coming from other modes of transportation, whether it's mass transit or taxi. Pretty consistently across markets, we see Uber come back faster than taxi, faster than other forms of transport. And we also see it with our consumer base.

We're seeing a couple of other interesting trends. One is that the workday non-commute part of our business is nearly fully recovered in a number of big markets. When you look at New York or São Paulo or Rio or Melbourne or Sydney, these are major markets, where workday non-commute is actually sometimes back to normal or back to pre-pandemic or close to. That is a new use case again pretty consistent with new riders are coming in. And we're also seeing suburban volumes actually grow faster than urban volumes.

Is that a temporary factor, or is that a permanent factor? Remains to be seen. But I think what it signals is that, if people move, regardless of where they're moving, the use cases that are borne out of Uber continue to be an important part of everyday life.

My take

Leaving aside Khosrowshahi’s platitudes about the importance of Uber’s role in our daily lives, there’s no question that the firm has been badly hit by the UK Supreme Court ruling. In its stock market filings, the firm admits that such rulings would mean it has to “fundamentally” change its business model”, which would have an “adverse effect” on its “financial condition”.

Uber has around 60,000 drivers in the UK. How many will now attempt to stake a claim against the firm.  For its part, Uber seems to have tried some damage control, sending a message to each driver’s dashboard that “This judgment does not apply to drivers who earn on the app today”.

Then of course there’s the knock-on effect on consumers of the Uber service. One report from Deutsche Bank suggested that Uber might end up facing as much as $2.5 billion in VAT back tax. That, or other similar charges, would be a burden that surely would end up being passed on to customers in some form with a resulting competitive cost. This Supreme Court ruling is specific to Uber and as such, does not apply to rivals (although it will surely encourage similar actions against others). 

Add to this the perception that Uber doesn’t have many allies in the Euro-cracy over in Brussels and it does look as though the firm is more in the passenger seat right now when it comes to influencing non-US regulatory roadmaps. Hopes of a repeat of Proposition 22 might just be California dreaming.