Uber — saviour or exploiter?. A perspective on the interplay of…
By: Sajid Khetani
Tags: Innovation, Business Design, Strategy, Legal, Uber

Uber — saviour or exploiter?

A perspective on the interplay of business and law from the lens of business design Sajid Khetani Dec 16, 2021·4 min read

Photo by Thought Catalog on Unsplash

Uber — the saviour

Let’s revisit the time when hailing a cab or a rickshaw was an inconvenient experience and I am sure everyone has their share of experiences. Uber picked up this problem and built an entire business around it. Its proposition was simple, through its mobile app one could hail a cab at the click of a button. It also provided the estimated fare and time of arrival, which provided a great deal of convenience to the customers.

Who are the drivers? The market was earlier dominated by city-wide taxi services and the supply was dictated by the issuance of permits/medallions. Very often than not, the permits were in huge demand and it commanded a hefty premium.

Uber addressed this problem by opening its platform to individuals who had a car and a driver’s license. This led to an explosion of service and the way the taxi industry used to operate was disrupted forever. But this also led Uber to be swamped by a flurry of lawsuits. Out of all the legal troubles which Uber has been facing, the key one has been around its classification of the drivers.

Uber — the exploiter?

The contention has been around whether the drivers on the Uber platform be classified as employees? If yes, then Uber is mandated to provide employee benefits such as insurance, paid sick time, etc. to the drivers.

Drivers are not contractors

Uber has been contesting this claim by a simple argument that it’s a technology platform and the drivers are freelancers/independent contractors who are not bound by a stipulated number of work hours. It has settled the cases in a few instances and in some cases they have taken a turn for the worse, as recently witnessed in California.

In one of the cases filed in the UK Supreme Court, Uber has lost a long-running employment tribunal challenge. The court dismissed their appeal and reaffirmed earlier rulings that drivers who brought the case are workers, not independent contractors.

In a press summary, the court said: “Drivers are in a position of subordination and dependency in relation to Uber such that they have little or no ability to improve their economic position through professional or entrepreneurial skill. In practice, the only way in which they can increase their earnings is by working longer hours while constantly meeting Uber’s measures of performance.”

Uber, the Principal

An ongoing bone of contention for Uber has been the contractual obligation between them and the customer. Uber has argued that the acceptance of a booking constituted a contract between the passenger and the driver — to which it claimed it was not a party. It has consistently sought to maintain that its only role was to act as a booking agent providing technology services and collecting payment as an agent for the drivers.

This argument suffered a blow in the High Court at London. U.K. judges ruled that the firm should enter into a direct contract with passengers when providing car journeys and therefore assume more responsibility for each trip booked on their app.

In concluding the judgement, the High Court makes it clear platforms cannot avoid a contractual obligation — writing that “in order to operate lawfully under the Private Hire Vehicles (London) Act 1998 a licensed operator who accepts a booking from a passenger is required to enter as principal into a contractual obligation with the passenger to provide the journey which is the subject of the booking”.

The interplay of business and law

I am not getting into the legalese of this issue but highlighting Uber’s strategy of solving a problem for the masses, thereby disrupting the entire industry — albeit creating a lot of ambiguity on the applicability of the existing laws.

This is where the interplay of business and law turns interesting. Legality depends on a multitude of variables, which is also open to interpretation. Especially, when we are looking at ambiguous cases such as Uber, where the law in many cases is catching up with the emergent realities.

To sum up, being on the right side of the law is detrimental to the success of the business. Having said that, testing the interpretation with a sound legal understanding in a disruptive market is a good strategy in distributed markets — Irrespective of the win or loss.

What do you think? Would love to hear your thoughts?

Until next time!

~ Sajid

Disclaimer: The views expressed are for informational purposes only. It should not be considered as advice or opinion.

(Sajid is a Strategy Consultant and founder at Le Monturé Strategy who works at the intersection of human behaviour, business design and innovation strategy. He blogs at sknotes and tweets @sajidkhetani)