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The tussle between gig-companies like Uber and its employees

A few months ago, just after the U.S. presidential election elected Joe Biden to replace Donald Trump, there were talks about Uber and other gig-economy companies in were involved in a legal tussle in California wherein they secured a huge legal victory. In the 2020 elections in the United States, California held a referendum in which it wanted people to poll a yes or no vote on a bill called “Proposition 22” which was crucial for companies such as Lyft, DoorDash, Uber, and GrubHub.

These companies wanted their drivers and food delivery men to be listed as “contractors” and not as workers; threatening to quit the state if their demands are not met. Such firms employ “casual’ employees who have become part of our everyday lives. Their presence in the markets has grown multifold making them being priced at tens of billions of dollars in the private equity world as well as in public markets. 

However, things are not as swift as they look because these gig-economy businesses run on precarious business models. Ride-hailing or delivery business firms such as Uber and Lyft, for instance, often encounter losses on every delivery made and every ride provided, basically on every transaction they take up. In the thirds quarter of 2020, Uber’s loss before interest and tax amounted to (LBIT) USD 625 million in comparison to its net loss of USD 6.8 billion reported during the 2020 financial year. The pandemic has been linked to a lot of this. However, these businesses have signalled that as soon as the administration of covid-19 vaccines helps to reopen markets around the world, they will become profitable once again. But running a profitable company allows a business to both attract fresh revenue, especially when in times of unusual and unprecedented events such as the pandemic, the company is forced to hold its expenses down. 

Employee status would have given rise to a variety of labour rights that are not enjoyed by today’s gig-workers as ‘independent contractors.’ It would also have increased costs for gig-economy businesses. In turn, these increased costs would have become a highly vulnerable spot in the company’s accounts in the face of the pandemic-induced downturn in sales. All this in line would have thrown their hopes of turning to profitability in an alienated corner.

The difference matters a lot. For Example, The workers in a gig-company situated in California may not have the same access to unemployment benefits, a workplace protected by occupational safety, paid sick days, overtime pay, and health laws as received by other employees. 

A law called the “Assembly Bill 5 or AB5” would have granted these privileges to the contractual workers. But the California Assembly had attempted to head this off earlier. 

A senator, who contributed to drafting the Assembly Bill 5 and opposed the Proposition 22, said, that instead of simply paying their drivers or freelancers, these huge gig-corporations have decided to forge almost USD 204 million towards the campaign to change the rules for themselves. They want to stick to their rule and offer less than what the state laws require for their employees, according to the Los Angeles Times.

Uber and other gig-companies managed to persuade the state’s otherwise left-leaning electorate, through slick ads, after spending over $200 million in California, that they would actually pay their drivers and delivery agents well. But according to the National Employment Law Project (NELP), the fact was that after Proposition 22 passed, anyone driving an average of 35 km per hour in a 40-hour workweek would make $287 less per week. This is in addition to a number of reductions in healthcare and other reductions. A “permanent underclass of workers has been created” was said by the NELP.

Uber has experienced its share of legal difficulties outside the US also. In China, it conceded defeat and sold out to Didi Chuxing, its biggest rival there. In Europe and the UK, it has been receiving flak as well. Last year, in France, Uber lost a ruling at the top court of the country, meaning its drivers had the right to be considered employees. Uber’s labour practises in other parts of Europe, such as Germany, Italy and Spain, have generated hackles for local taxi unions, which have so far been able to persuade lawmakers to restrict their supply.

But it would seem easier to seduce an electorate into making a convenient decision, itself a gigantic endeavour than to persuade supreme court justices. Mint announced on Friday, 19 February, that Uber suffered a big setback in Britain, one of its most important markets when the Supreme Court of that country said that a group of drivers should be listed as employees entitled to minimum wage and holiday time. The British Supreme Court ruled unanimously that by setting prices, allocating rides, forcing drivers to follow certain routes and using a rating system to discipline them, Uber acted more like an employer, although it argued it was just a technology platform that linked drivers with passengers. For the time being, this decision is limited only to the 25 drivers who brought the case initially. To decide how it will affect all Uber drivers in Britain, the decision will be relayed to a job’s tribunal.

Unsurprisingly, Uber is playing down the decision of the court, saying it will press the jobs tribunal to narrow the scope of the ruling. Anyone with a simple sense of logic can see, however, how this will cascade down to Britain’s 60,000-plus Uber drivers and reverberate far beyond the boundaries of that country. The effect would also go beyond Uber to other gig-economy companies that rely heavily on casual employees.

We are somewhat removed from such questions in India. There have been laissez-faire attitudes regarding our disposition towards ‘informal economy’ jobs. It is therefore a surprise to see an effort to ensure that, under a revamped labour code, food delivery agents and ride-hailing drivers earn certain social security benefits. It remains uncertain how gig-employers in India can avoid that.

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