News & Politics

The Ruling That Could Change New York’s Uber Landscape

As California makes it tougher for companies to classify drivers as independent contractors, New York rideshare workers wonder if their future finally holds health insurance

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Last month, the California Supreme Court took up the case of Dynamex Operations West Inc., a package delivery company that depends on a labor pool of independent contractors to drive their vehicles and make their drops. There are many such companies across the country — they’re the backbone of the logistics industry. It’s been that way for years, decades even.

But as the case adjourned a few weeks ago, the result was a decision that could change the way a lot of companies, delivery and otherwise, define their workforce: contractor or employee. And it could have massive reverberations for companies on the other side of the country here in New York, particularly one that stands at the forefront of the legendary gig economy: Uber. 

Contractors are different from regular employees in that they aren’t employees at all, although it’s easy to get confused because they “do” “work” “for” “the company.” Contractors form short- or long-term agreements with employers to do work for an agreed-upon fee or rate. They get pay statements on 1099s while most of us get W-2s. There are no benefits — no health plan, no 401k, no sick leave, no nothing.

From a company’s perspective, the situation is beneficial because it reduces or eliminates several cost burdens, thus enhancing its competitive edge in the marketplace. From a political perspective, the contractor life might sound an awful lot like freedom to your garden-variety conservative lawmaker. From a worker perspective, being an independent contractor basically sucks — though a real-life manifestation of “easy come, easy go” is not without its charms.

Previously, California determined whether workers were contractors or employees by using something called the Borello test. Named for a 1989 ruling by the same court, the test was a multi-question, nuanced survey/litany that took into account many factors concerning the worker’s role, the company’s needs, the extent to which the employer has control over the worker’s performance, and so on. It’s heavy stuff, commensurate with an issue that affects millions of lives, and billions in commerce, in a state that some metrics rank as the world’s fifth-largest economy. 

The new ruling essentially scraps the old matrix of deep and deliberative questions and simplifies it with a three-pronged inquiry that boils down to: What happens to your company if these workers just disappeared? Do you still have a company? Can you still conduct business? Can you pay your light bill? Do you even exist?

Which brings us to us, one coast over. Reader, a thought question: If you take away Uber drivers — if they vanished or were raptured or, I dunno, they just stopped logging on, en masse — do you still have Uber? The very question must seem absurd. Yet rideshare companies (not just Uber but Lyft, Juno, and the others), using a model not dissimilar to taxi companies here and elsewhere, don’t actually employ drivers to pick you up to take you to work, the doctor’s office, or to Kennedy Airport — they contract them.

What began as a small technological disruption in the late 2000s has grown into a column of municipal infrastructure, powering many dependent industries across the boroughs. Isn’t their brand their mission? Isn’t their mission to have drivers pick you up and take you places? Uber has its courier/meal delivery service, it’s true, but to borrow a Ben Stiller line from The Meyerowitz Stories (New and Selected), that’s a lot of pressure to put on coffee.

***

The Falchi Building in Long Island City is a massive former industrial building, recently made friendly by a well-meaning new facade in earth and slate tones and the hum of perpetual development. It sits behind LaGuardia Community College, nestled in a set of city blocks ringed by the arterial spray of outbound Manhattan traffic that’s just skittered down the ramp of the Ed Koch Bridge, onto Queens Boulevard and points east. Since 2013, when an ambitious renovation plan was kicked off by Jamestown L.P., which also owns Chelsea Market, Falchi has become a hub of the city’s taxi industry and, in many ways, an emblem of the ability of at least one market — real estate — to pivot smartly with changing times.

Inside five fast years that saw the city flood with rideshare vehicles, the yellow cab medallion lose much of its value, and the U.S. elect a new president, Falchi has taken in such tenants as Uber, Lyft, the New York City Taxi and Limousine Commission (along with its quasi-ancillary court system, the Office of Administrative Trials and Hearings, or OATH), a taxi school, and a variety of premium food stalls to nourish any caffeine or carbohydrate craving. Stalking potential interviewees for a quick word, I’ve walked the interior length of Falchi’s main concourse several times. It gleams with the synthetic spit-polish of a vintage Williamsburg goliath, everything old made new again; you half-expect to walk outside and run smack into the old Domino Sugar Factory on Kent Avenue.

Outside, there’s this company called Velozcar, operating one of those curbside, walk-in buses, the kind where you might go in to buy health coverage or get your cat spayed, except Velozcar is signing up drivers, to lease sedans, black cars, SUVs, and so on. The Velozcar bus is shamrock green and fitted with loudspeakers blasting a robo-lady voice promising “Free fresh donuts. Fresh donuts every day. And free.” It’s one step away from promoting the new life that awaits us on off-world colonies.

Me and another guy are standing on the top steps, looking at the bus, which is partly obscured by a Citibike rack and two food trucks. “Are you a driver?” I ask. He shakes his head. We’re both sort of mesmerized by the loudspeaker, which has just been cranked up from furtive to borderline hostile. “I bet they don’t even have fresh donuts,” the guy standing next to me says. He gestures back toward Falchi, “We got fresh donuts.” I put two and two together and realize he’s with the Doughnut Plant, which has a street-facing storefront. For a while, it looks like nobody’s interested in getting on the bus, making the dramatic increase in the loudspeaker’s volume seem comical and sad. Then, as if by clockwork, a bunch of kids from the nearby high school line up to get free goodies. They’re none of them old enough to drive a taxi, but the mass of bodies is enough to suggest that Velozcar warrants a crowd — the old “hey, you never know” marketing strategy.

People going into and out of Falchi either work there, were summoned there, or are going in to enroll with Lyft or Uber. There are quite a few cops — city, Port Authority, some Corrections guys — who seem to be there for court appearances. Drivers self-identify by carrying scrunched-up official papers and wearing pensive looks as they hurry in to take care of some piece of official business — odds are, something not pleasant.

Since I stopped driving for Uber and Lyft and starting writing about the rideshare industry, I’ve probably spoken with twice as many drivers as I ever did on the job. I know what they’re going through and I know what they’re going to say when I ask them about the California Supreme Court ruling, but I want to get their reaction anyway. Besides, this isn’t so much a news event as the possibility of one, perhaps several years in the future. Real change would essentially require two things to happen: Localities would need a legal framework that prescribes California’s formulation of the contractor-or-employee question (it will mean a lot if the Supreme Court ever weighs in on it), and the affected companies would have to say, yes, we still intend for our business model to endure in this market, even after such a foundational shift. There have been longer shots that have paid off, but this is a sizable two-legged parlay bet, and a lot remains to be seen and said before the horses come out of the gate.

Hamde Hassan Al-Mohammad is smoking a cigarette with his pal — both have been Uber drivers for more than a year. Al-Mohammad speaks in rolling, circular sentences about the plight of rideshare drivers. He cites the March suicide of Nicanor Ochisor, the cabbie who hanged himself in his home in Maspeth, reportedly in despair after the value of his taxi medallion plummeted post-Uber. “The TLC are always talking about how they’re going to make a change, make a difference. But they aren’t doing anything.”

At the risk of conflating the TLC, which regulates drivers, and the rideshare companies, which give many of them their livelihood, I press on about the California Supreme Court decision. “What if all the drivers disappeared, would these companies still exist?” The two men shake their heads — it seemed silly to ask. We even chuckle a little.

I ask them what they think will happen, in the wake of the ruling. For a moment I’m once again just another malingering driver, frittering away a few minutes between jobs, pondering legal or philosophical mysteries well beyond the grasp of anyone present. “It depends, you know,” Al-Mohammad begins, and we discuss the different ways employee status would be an upgrade over the contractor life, a boilerplate rundown that you’re likely familiar with (401k, medical, etc.).

The conversation goes much the same way with Simon, a Bangladeshi driver who’s just come from the Uber and Lyft offices with his wife. They’re recent Maryland transplants who have to jump through a few hoops to re-enroll in the New York territory. He tells me that Maryland/D.C. driving is very difficult, that one relies on those rare long fares to make ends meet. Without rideshare drivers, do you have rideshare companies? Of course not. Would it be better to be an employee, rather than an independent contractor? Of course. The well-meaning uselessness of the discussion dissipates in the air, and we part ways politely.

I snag a driver walking out of Uber with one of those shiny, branded folders. He asked me not to use his name, but his heartache had to do with health care. “I pay $600 a month for health coverage. Every week I make money driving, but it goes right out again.” Tell me you don’t know what that’s like.

***

I reached out to Uber, Lyft, Grubhub, and other firms to see if they wanted to add anything to the conversation. Uber, whose long history of icing out press inquiries makes the Obama administration look like the paragon of transparency, didn’t reply to my email. Lyft didn’t get back to me in time, but their auto-reply had that fuzzy, Lyft-is-nicer tone. (“We know you’re likely on a deadline…” Aw, shucks.) Grubhub’s communications VP, Brendan Lewis, replied quickly with a note explaining that the company has an ongoing court case of its own — Lawson v. Grubhub, a case not unlike Dynamex, except this time the plaintiff is a delivery driver, not a firm — and couldn’t really comment substantially, except to say that Grubhub would continue to ensure its delivery partners “can take advantage of the flexibility they value from working with our company,” etc., etc.

Between drivers who can only speculate, but who are more than cognizant of the challenges “independence” entails, and the companies, guided by whatever mechanisms they can exploit to acquire and maintain a competitive edge, there’s little definitive that can be said to project the consequences of the California court’s ruling into the industry’s future. The Los Angeles Times got some pointers from Michael Chasalow, a USC law professor, who suggested that rideshare companies might have to reclassify contractors under the new ruling, but that it wouldn’t be a panacea for the drivers because the ruling — and any decisions made in its wake — will be interpreted as narrowly as possible by any and every company it affects. In California, some things (like wages and down time) might experience a shift, while others (like what’s considered taxable income, and what can be deducted as a business expense) remain nested within other, equally lugubrious legal entanglements. 

For example, an ongoing case pitting rideshare drivers against the city of Seattle over the right to unionize is a whole other sticky wicket. Unlike a wide range of industries and professions, from education to law enforcement, entertainment, and construction, the taxi industry has, infamously, never welcomed unionization on a significant scale, preferring instead to commodify the right of pickups, first with a marketplace of medallions, now with smartphone software. The act of reclassifying drivers as employees, rather than contractors, might change that, especially in an era that’s seen a recent spike in collective action.

A state other than California could, conceivably, hear a suit against Uber or Lyft, brought by an agglomeration of drivers, using the California Supreme Court decision as a precedent. It’s taken a little less than a decade for these firms to grow from a weird little idea to an integral part of our daily lives. There’s nothing to be said for sure about what’s to come, except that, in the post–Cambridge Analytica, post-#DeleteUber age, more than a few of us are wary of the utopian promise of “the disruptors,” and we’re beginning to become more aware, in matters as far-ranging as health, security, and labor relations, of what’s a feature, and what’s a bug.

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