Could Uber’s entire business model be at risk? Uber drivers are employees of the company not contractors, a US court has ruled, in a move that has the potential to hurt the soul of the app-based ‘cab’ service.
Uber allows consumers to use a user-friendly smartphone app to find a driver and instantly book a ride. The company motto vows to be “everyone’s private driver”, making more than 200 cities “more accessible” in 54 countries around the world. Hated by some, loved by many, Uber’s business model seems to be bringing a strong sense of positivity among customers and independent contractors alike.
UBER’S DISRUPTIVE INNOVATION
Many consider Uber a disruptive force working against the entrenched taxi industry that, according to the startup, fails to serve consumers. The brainchild of two tech entrepreneurs who could not find a taxi on a cold night in Paris, this rapidly growing car-dispatching service currently faces virtually no expenses for the more than one million drivers who facilitate rides through the app – riding the wave of the so-called “shared economy”. But with Uber’s business model under the guillotine, everything could change.
CRITICS OF UBER’S BUSINESS MODEL
Critics argue that Uber has fallen short on safety measures, with cities such as New Delhi banning the service from operating in the Indian capital after a passenger accused one of its drivers of rape.
Yet, as a woman passenger, I must say that most of my negative experiences were with taxi drivers. I often found myself having to reject sexual advances. This is not to generalize against the profession, but there is little accountability in the taxi industry, as drivers as not customer-reviewed.
UBER’S BUSINESS MODEL IS A CHALLENGE TO REGULATORS
Besides being a ‘pain in the ass’ for taxi drivers, Uber has always posed challenges to regulators. The recent decision by the California Labor Commission, which was filed in a state court, disputes Uber’s claims that its drivers are simply contractors. Uber holds itself out as nothing more than a “neutral technological platform”, designed to enable drivers and passengers to transact the business of transportation. The court, however, claims that Uber is actually involved in “every aspect of the operation”.
WHAT ARE THE CONSEQUENCES?
If the ruling, which was sparked by a San Francisco-based Uber driver holds, Uber will have to face a number of legal obstacles and cash in significant extra costs, such as Social Security, worker’s compensation and unemployment insurance. Beside the expenses, what worries is how the ruling could drastically affect Uber’s business model and the founders’ vision.
An alternative travel option comes in the form of smaller wheels:
