Uber, Lyft and Sharing Economy Regulations

[madd0ct0r]

You keep saying that about poor and minority founders. If the community they are from is so poor, how are the interns parents able to support the intern while the intern makes money for the founder?

That sounds like a fairly nasty transfer of wealth, in.essence the founder would be exploiting their own community. I've worked in a startup, in San francisco, for a minority founder. There wasn't any high ideal beyond greed there

[salm]

No, the founder is engaging in a perfectly reasonable arrangement with someone. In most cases the founder will just go ahead and work with an intern anyway. (Or is probably even aware that their arrangement with the interns is technically illegal.)

If the intern is interested in the project (and once again they in often cases place that above money). I have absolutely no problems at all with a founder and an intern going forward with such a relationship. Anything otherwise pretty much leaves the world of founding startup new companies to people that have access to capital already. Which in the US at least would pretty much hit minority and poor founders the hardest.

Now once the company gets to the point that it has raised few hundred grand in capital, and is brining in revenue, and espescially if they have hired full time paid employees, and they are still relying on unpaid internships, I would be perfectly fine with saying "Dude, stop being a bum and pay your interns.)

I guess we just funamentally disagree.

[Simon_Jester]

Yeah, don't expect regulations to kill Uber. Well, at least, don't expect them to kill the idea of Uber. Pandora's box has been opened, and we've all had a look inside at what could be. Even if they could kill Uber tomorrow, the overwhelming demand for ride-sharing/taxi service that didn't suck enormous horse dick would still be there. The days of the previous taxi paradigm are numbered, because we now know that it doesn't have to be that way. So whatever form it takes--taxi companies Uberizing, Uber becoming a nationwide and fully legit service, fleets of self-driving vehicles available for hire--the fundamental shift has happened. The convenience of the Uber model is just too great an appeal to leave it unfulfilled...especially now that so many millions of people have had a taste.

Well, Uber is based on a pretty good idea- essentially, using a cell phone app and an automated dispatcher system in order to call a cab.

But if that idea is good enough to be worth adding to our society, then it should be able to function on its own merits. It should not require the new taxi company using the system to cheat its drivers. Or to refrain from insuring them. Or to otherwise cheat and take shortcuts around laws that every other taxi service has to follow.

Who said that what Uber is doing constitutes greed. This is a model they came up when they were an early stage startup. Were they being greedy when they came up with this model? Well maybe the VCs were, but the entrepreneurs? Based on this logic all startup founders are greedy.

If my business model revolves around expecting people to work for me, without providing them the compensation mandated by law, then they are cheating their employees. The "entrepreneurs" knew full well whether or not they'd be able to pay their workers. If they knew they couldn't pay their workers adequately, and that this was going to be a perpetual consequence of their business model, then they shouldn't have started the company. Just like no one should found a company dedicated to robbing people at gunpoint, or dumping toxic waste into your drinking water, or breaking any other law.

Uber is perfectly capable of consulting labor lawyers to figure out what its obligations are. They instead chose the route of shadiness- of ignoring the law when it was inconvenient, and hoping they wouldn't get caught. Simultaneously, they hoped to become big and rich. But when you're big and rich, people pay attention to you... and now they're getting caught.

Why treat this as anything other than what it is? It's an attempt to make MORE money by cutting corners. If Uber's business model is valid and they are actually superior to conventional taxi companies, they shouldn't need to cheat their employees in order to make a profit. If they DO cheat their employees, then either it is pure greed... or Uber's business model always depended all along on cheating employees. In which case Uber deserves to go under, by the same Darwinian logic we're applying to the conventional taxi companies.

I would hope Liberal politicians don't start repeating talk like that. Startup entrepreneurs tend to be more progressive and forward thinking and looking to solve the world's problems, and thus tend to lean liberal. If liberal politicians starting talking like this, startup entrepreneurs would turn conservative in a heartbeat.

It is simple. People starting businesses have to obey the law. They cannot rob, or cheat, or kill, or otherwise break the law.

If entrepreneurs are uncomfortable with this they are idiots. Because no one in their right mind actually WANTS to live in a society where an 'enterprising' person can just randomly ignore whatever laws inconvenience them. No startup wants to have to worry about whether the new bank that promises great interest rates is an unstable fly-by-night operation that's planning to take the money you deposited with them and run away. No startup buying vehicles for its motor pool wants to worry about whether the dealership cheats and sells substandard vehicles.

Everyone wants to live in a country with a First World economy- that is, in a country where the quality of products is regulated to ensure safety and reliability, where business practices are reliable and people who break the trust of those they do business with are punished. Where it is possible to sue for damages caused through another person's negligence or accident, so that one can avoid random unpredictable losses. Where customers can afford to buy useful products.

But the price of living in such a society is, well, having to obey a bunch of laws. Even if you're a supergenius super-entrepreneur. Because if you're that smart and your idea is that great and that likely to bring good to the world... frankly, there's no reason to think that you can't somehow make that idea work without breaking the law.

Just because the legal frameworks are not compatible with how the innovation economy works today, doesn't make the entrepreneurs "greedy."

"I'm starting an innovative business!" is not an excuse for ignoring the law. Plenty of very successful businesses have been founded by people who obeyed, and continue to obey, the law.

Case in point, it is common practice among many startups in the very early stages when the founder is still starving, to hire interns that to help build their product, or market, or whatever, and these internships be completely unpaid. This violates minimum wage laws. Is it because the founders are greedy? Well in some cases they are because they don't want to give up any equity. But even when the founder does give up equity, they would still be in violation of minimum wage laws. The founder doesn't have capital, or has very little, so he/she can't pay the intern a traditional wage.

Would it be ok for this lady to charge these interns money and then set them loose on the founders?

As many people have pointed out, unpaid internships are very bad for a large class of people (namely, college graduates seeking to start a career and a family). They may be good for a smaller class of 'entrepreneurs,' but since when has it been inherently right to condemn a larger group to live in total poverty and dependency, just to make it less hard for a smaller class to become wildly successful?

Moreover, if the company is successful, then the unpaid wages of a handful of interns will be pocket change relative to the wealth of the corporation. No real harm is done.

Uber has been incredibly successful and is very rich. They are not a fragile delicate flower of a startup company operating out of Dad's garage. It is not unreasonable to expect them to pay fair, legal rates for the labor and services of their employees.

Who wins in that scenario. Nobody, except for the state and politicians who can say their regulations have been enforced. The founder loses, the intern/cofounder loses too, and ultimately society loses because it is not that much harder for startups to get established.

On the contrary. The startups do not find it harder to get established, because startups created by responsible people who conduct themselves properly and obey the law still work just as well. There are plenty of ways for them to deal with that particular issue.

The startups which are penalized are the unstable fly-by-night operations run by people who intend to cheat their customers, their suppliers, their investors, their workers, or their business partners.

If you really want, look at what happens in societies that do NOT have such regulations on how businesses are conducted- i.e. most of the Third World. Do these turn out to be hotbeds of brilliant new business models? Generally not. What happens instead is that people are far more conservative with their investment capital, because of the increased fear of being cheated.

There's a reason that anarchy invariably leads to economic decline, while the creation of a functional, law-abiding and orderly society generally leads to steady economic growth. Without law and order, it is very unsafe and very unwise to invest money in something as strange as a 'new business.'

No, it is not.

According to the law of California, Uber was legally required to give them more money. The reason Uber lost that lawsuit is because Uber broke the law. And since Uber is plenty rich enough to hire good lawyers who should be able to advise it on issues like this, I can only assume they knew they were breaking the law, or at least stretching the existing law to the breaking point.

So this lady is doing nothing other than reaping the rewards of having earlier been cheated out of money that Uber was legally obliged to pay her.

And teaching others, who were cheated in the same way, how to retrieve their money.

The fact that at the time, these people agreed to a contract that paid them less than they deserved under the law, is irrelevant. The contract cannot protect Uber from the obligation to obey the law, and given how labor law works in America, it's Uber's responsibility to make sure the contract complies with the law.

How can Uber drivers have been cheated, when both parties agreed to the arrangement and it was faithfully executed by both parties. Agreement basically being "you now have access to our App as a driver, you use your own car, and when you want to take rides you sign on to the app and indicate your available, you get paid a certain amount per ride, the company gets paid a certain amount per ride."

As others have noted, a contract that breaks the law is unenforceable. If I manage to draw up a contract that entitles me to break the law, and you are harmed as a result of my carrying out the letter of the contract exactly, you can still sue me.

The alternative is to refuse to allow ANYONE to sign a contract until it's been vetted by both parties' lawyers, and the average Uber driver can't easily afford the time or effort to hire a lawyer just to go over an employment contract.

And at the time it was a perfectly valid cure to a real pain point felt by society at that point in time. Now today, the cure has become the pain. Pain in hindering the innovation economy. Now the government stepped out of the way and let the free market do it's thing, and later if new pains arise that the market can not or will not solve, then an appropriate regulation cure can be applied.

And if the pains arrive predictably within a decade or so of the laws being removed?

I mean, we deregulated the financial sector in the '90s, and within ten or fifteen years the financial sector had blown up in exactly the ways the existing legal systems were intended to prevent, with consequences that were fully predictable just from knowing what things had been like before that

The Information Age has not invalidated all the basic lessons of economics, human behavior, and physics that we learned during the 19th and 20th centuries. Laws that were enacted to protect people from problems that arose constantly from 1860 up through 1940, every single time there were no laws to prevent the problem... are often still very valid to prevent a problem from arising in 2015.

Of course for this to work we really need to get money out of politics, which should be society's focus instead of trying to stomp down on Uber.

Uber would no doubt love to put more money into politics- namely, Uber's money. This would be the most cost-effective way to ensure a safe future for Uber.

It is laughable to talk about campaign finance reform as a tool to make the world safer for corporations.

If Uber's business model is impractical due to the statute, then that is Uber's problem.

This isn't just an Uber problem, multiple sharing economy startups are running into the problem. You're saying that the new paradigm is wrong because it goes against the standards of the old paradigm.

If the new paradigm persistently leads to a "race to the bottom" in the quality, reliability, and responsibility of basic services... Yes. Yes I can say it's wrong.

It is like a coal mine arguing from being allowed to operate without regulation because otherwise it would be impractial for the coal mine to work. To which the response is usually "So?" and not "OMG we need to abolish regulation".

There is already demonstrated pain and need for coal companies to have reasonable regulations placed on them because people have died as a result. And the dying isn't in the distant past. It's happening today in the present day.

Do you think people haven't died of poverty, or diseases and stresses related to poverty? Poverty is an ongoing problem. And as Mayor de Blasio is quoted pointing out in one of the same articles you quoted, one of the consequences of letting tens of thousands of extra cab drivers swarm the streets of a major urban area is that ALL the cab drivers wind up poor. It's the tragedy of the commons. And the only solution to the tragedy of the commons, in a large society where you can't get the whole community to agree tacitly on how the commons will be used, is to regulate that commons.

Using unpaid interns because they require work experience has been a cancer on our society for quite a while now and I´d be very happy to get rid of some innovation if this meant getting rid of this horrible practice.

Are you talking about big mega-corps that want to take advantage of free labor, or starving startup founders who have no money using free labor?

How exactly do you propose to enact laws that will provide the needed thousands of dollars of saving for a "poor starving startup founder," but that don't provide billions of dollars of savings for the "big mega-corps?"

[biostem]

Let's say I started an App where person A could sign in and submit a request to have person B bring a BBQ to person A's home, and cook food for them - at a rate set by my company, and through which, person A paid my company, and I paid a share of that to person B. Person B isn't licensed or regulated by anyone, nor are they carrying any sort of special insurance. Person B also doesn't necessarily file any taxes on the money they're making, and my company doesn't provide any sort of health benefits, time off, or other such benefits, as I consider person B an independent contractor. Further, what if the time taken to perform their duties, divided by the share of the money earned, falls below the minimum wage?


And as a related question - if I have private/personal auto insurance, and my Uber passenger gets hurt in the course of my driving them - can my insurance company refuse to cover the damages, and said person come after me directly, (since this is a "commercial" transaction, but my insurance is personal)?

[Terralthra]

Let's say I started an App where person A could sign in and submit a request to have person B bring a BBQ to person A's home, and cook food for them - at a rate set by my company, and through which, person A paid my company, and I paid a share of that to person B. Person B isn't licensed or regulated by anyone, nor are they carrying any sort of special insurance. Person B also doesn't necessarily file any taxes on the money they're making, and my company doesn't provide any sort of health benefits, time off, or other such benefits, as I consider person B an independent contractor. Further, what if the time taken to perform their duties, divided by the share of the money earned, falls below the minimum wage?

There are actual laws regarding independent contractors. If the company determines the time and duration of work hours, that's a strong indicator that legally speaking, the worker is an employee, not an independent contractor.

And as a related question - if I have private/personal auto insurance, and my Uber passenger gets hurt in the course of my driving them - can my insurance company refuse to cover the damages, and said person come after me directly, (since this is a "commercial" transaction, but my insurance is personal)?

Yes. This has already happened. More than once.

[Simon_Jester]

Right.

Looking at it from the insurance companies' point of view, commercial drivers:

1) Drive more than almost anyone else.
2) Have more incentive to drive when tired, sick, or otherwise in less than tip-top shape.
3) Are more likely to carry passengers or valuable cargo that can be wrecked in an accident.

For all these reasons, they are exposed to far more risk. Any insurance company in its right mind will correspondingly charge more money to cover a commercial driver.

Which means that if you decide to act like a commercial driver (driving to make a living, being on the road all the time, carrying passengers for money), while expecting the insurance company to cover you as though you were a private motorist...

From their point of view, you're trying to commit a form of insurance fraud. Because you're trying to get 'deluxe' insurance coverage that will cover more frequent and more serious accidents, while only paying for 'economy' insurance coverage that will not cover those things.

And I'd argue that the insurance companies have every right to push back in this situation, and that this is an excellent example of yet another way in which the "sharing economy" needs to make sure that the people coordinating all this sharing think through their damn business models before trying to make a quick buck at the expense of the general public.

Insurance doesn't exist because of the government or because of 'overregulation-' it exists because people don't like getting crippled or having their cars destroyed in accidents. If Uber and so on try to improve their income stream by ignoring the need for commercial insurance, a lot of people out there will pay the price, many of whom were innocent bystanders. And many of whom had no way of truly grasping just how bad and how serious the consequences would be for them.

Let's say I started an App where person A could sign in and submit a request to have person B bring a BBQ to person A's home, and cook food for them - at a rate set by my company, and through which, person A paid my company, and I paid a share of that to person B. Person B isn't licensed or regulated by anyone, nor are they carrying any sort of special insurance. Person B also doesn't necessarily file any taxes on the money they're making, and my company doesn't provide any sort of health benefits, time off, or other such benefits, as I consider person B an independent contractor. Further, what if the time taken to perform their duties, divided by the share of the money earned, falls below the minimum wage?

Yeah, this is another good example. You can hire a cook or a caterer, there are well defined rules for how to do that... but it's farcical to claim that caterers who do what you tell them and operate on a schedule of your choosing are "independent contractors."

Among other things, contractors are free to set their own rates, and are free to market their product to numerous buyers.

There's a concept called monopsony, which is sort of the inverse of a monopoly.

In a monopoly, there is only one entity selling a product, so you can't get the product except on terms set by that entity. If they want to jack up the price, they can. If they let the quality of their goods slip, you have no recourse in the short term. Sure, in theory someone can set up a new company to compete with the monopoly by selling a better or cheaper product, but that takes years of time and a great deal of money, and it's especially likely to fail if the monopolists are smart enough to buy out new competitors as they arise.

Monopolies have a very distorting effect on the free market, and very much undermine all the mechanisms that in theory are supposed to make market economies into efficient engines that serve the public good.

In a monopsony, you have the reverse problem. Instead of having one entity selling a product to many buyers, you have only one entity buying a product, from a variable number of sellers. This, too, distorts the market, because it allows the single buyer to compel the sellers to sell at prices that would otherwise be uneconomical and inefficient for them. Sure, in theory the seller could just go out of business and go back into business doing something else... but that is risky and very costly and time-consuming.

One problem with these growing 'sharing economy' corporations is that while they claim their workers (drivers, cooks, subletters, whatever) are independent contractors, for each such company, that little niche market is a monopsony. The contractor has no choice but to 'sell' his or her labor to that one company, or to one of a small number of similar companies that all charge similar rates (an oligopsony, the reverse of an oligopoly)

If I don't think Uber is paying me enough, I can't just go into business for myself as a taxi driver because I'm dependent on Uber's software to tell me where to pick people up.

I can't go into business for a rival company because of the same problem- either there's no competitor in the whole city, or there IS a competitor (e.g. Lyft) who has the same business model and pays basically the same rates, so that I gain no advantage by 'contracting' for Uber's rival.

I can't bargain with Uber for more money, because I'm not really a 'contractor' in the usual sense of 'an established organization, or a technical specialist, with valuable skills and assets.' I'm basically just one more unskilled laborer. I don't even have as much bargaining power as some unskilled labor-supplying contractors. Because I'm only one person, not a small company that has contracts with multiple businesses and that can afford to get dumped by one employer.

These disadvantages are very normal in the world of employers (who are NOT free to leave their jobs at will to seek higher wages, at least not in real life). But they are very rare in the world of independent contractors. And many of the ways we relax employment law to accomodate independent contractors reflect that independence- which we assume contractors have, but which Uber's drivers don't have... because they're not really contractors, they're employees who just happen to get their orders from a software package rather than a boss or a dispatcher.

[Terralthra]

Relevant:

At least four men who were ticketed by Los Angeles International Airport Police while driving for Uber’s low-cost car service have criminal convictions that would bar them from operating a taxi in Los Angeles, records show.

The drivers have been convicted of child exploitation, identity theft, manslaughter and driving under the influence, according to court records. Each offense would make them ineligible for a city of Los Angeles taxi permit.

The criminal histories recently came to light when a representative of the taxi industry presented a city official with a binder containing citations and court records for eight Uber drivers who were cited for minor violations at the airport over the last 18 months. The Times obtained a copy and independently confirmed that the records were accurate.

Four drivers mentioned in the files had charges or convictions that would probably not preclude them from applying for a city taxi permit because the incidents occurred more than seven years ago or the violations were misdemeanors.

The disclosures come as the Los Angeles City Council weighs whether to assert jurisdiction over a new airport permit process that would allow Uber and other app-based ride companies to legally pick up passengers at LAX. And they raise new questions about how effectively the transportation giant screens its drivers.

The taxi industry has fought to keep Uber and similar ride-hailing services from operating at LAX, saying that they create unfair competition because their drivers are held to a lower standard than licensed taxi drivers.

Last week, six City Council members moved to reexamine the airport permit process, saying that elected officials should be given time to weigh in on questions related to public safety. If the motion passes Wednesday, the council could veto the policy and send it back to airport officials for revision.

“These are cases that reinforce the need to have this kind of dialogue,” said Councilman Paul Krekorian, who has asked the council to assert jurisdiction over the Board of Airport Commissioners. “They’re very good examples of why it’s important.”

Efforts to reach several of the drivers cited in the records were unsuccessful.

Last year, the top prosecutors of Los Angeles and San Francisco sued Uber, alleging that the company misled consumers over background checks. At the time, San Francisco Dist. Atty. George Gascon called the company’s verification process “completely worthless” because applicants aren’t fingerprinted.

On Tuesday, an Uber spokesperson referred The Times to comments made in a company blog post last month.

In that statement, Uber’s chief security officer, Joe Sullivan, wrote that “every system of background checks that is available today has its flaws” but that Uber’s checks “stack up well” against the taxi industry’s.

In 2014, he wrote, at least 600 people who were licensed to drive taxis in Los Angeles, San Diego and San Francisco failed Uber’s background check, including 19 people convicted of sex offenses and 36 convicted of DUI.

Sullivan said drivers cannot work for Uber if they have been convicted of any felony, or any violent or sexual crimes, in the last seven years.

One Uber driver who was ticketed at LAX was convicted on 14 counts of felony identity theft in 2012. Under the terms of his five-year probation, he cannot have access to any personal identifying information, including credit cards and debit cards, according to court records. All Uber passengers are required to pay with a credit or debit card, but payments are handled through the app.

Another driver was convicted of voluntary manslaughter in 1998 and sentenced to 25 years in prison. Parole records show that he was released last year. That conviction would not necessarily bar him from driving for Uber, but it would make it difficult, if not impossible, to get a taxi permit.

The city of Los Angeles automatically rejects permit applications from drivers who have been convicted of a sexual or violent felony, reckless driving or a hit-and-run crash that left someone seriously injured or killed.

Drivers must wait seven years after being convicted of other crimes, including misdemeanor offenses involving drugs, weapons, violence and fraud, before being eligible for a permit.

[Simon_Jester]

So, Uber hired, to drive around in a service that routinely carries vulnerable individuals...

...A child molestor, a murderer, a drunk, and an impostor-for-personal-gain.

Wow.

Now, he says the taxi companies are doing the same thing- would he care to name names?

[Raw Shark]

Yeah, that's even more (ahem) lax than I thought they were being. I like to make jokes about my company's background check, but as far as I recall, you can't work there if you have:

ANY Felony in the last 5 years
ANY DUI EVER
ANY Fraud EVER
And, my personal nemesis, no more than 6 points on your license in the last 5 years

That said, there are certainly some places where Uber's policy would exclude somebody ours would allow, and the markets they're claiming 600 rejections in are huge, but the only example I'm seeing from this article would be somebody who was convicted of a felony or violent or sexual crime exactly six or seven years ago.