San Francisco throws down gauntlet to Uber, Lyft

A subpoena follows a landmark California legal decision.

FILE PICTURE: The Uber ride sharing app is seen on an Android portable device on February 5, 2018. (Photo by Jaap Arriens/NurPhoto via Getty Images)
FILE PICTURE: The Uber ride sharing app is seen on an Android portable device on February 5, 2018. (Photo by Jaap Arriens/NurPhoto via Getty Images)

Uber and Lyft are in the regulators’ cross hairs again — this time, in their own backyard.

The City Attorney of San Francisco, Dennis Herrera, issued a subpoena to Uber and Lyft on Tuesday to figure out whether or not they classify their drivers as employees or contractors.

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Ride-sharing companies like Uber have long argued that, because they function as an intermediary “technology company” connecting the passenger and the driver, they can classify their drivers as independent contractors — meaning they get to avoid giving them traditional employee benefits.

“[San Francisco’s laws] guarantee employees basic humane benefits like sick leave, health care, and paid parental leave. We are not going to turn a blind eye if companies in San Francisco deny workers their pay and benefits,” Herrera said in a statement. “If your company is valued at $62 billion, you can afford to give your workers health care.”

In April, the California Supreme Court unanimously ruled to limit businesses from classifying workers as “independent contractors,” which limits their access to key worker protections like minimum wage, health care and rest breaks.

“The risk that workers who should be treated as employees may be improperly classified as independent contractors is significant in light of the potentially substantial economic incentives that a business may have,” the court ruled. “Such incentives include the unfair competitive advantage the business may obtain over competitors that properly classify similar workers as employees.”

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Classifying drivers as contractors also means they are at the mercy of algorithms, which push fares (and drivers’ earnings) down for passenger convenience.

In March, an analysis by MIT’s Center for Energy and Environmental Policy Research (CEEPR) found that Uber and Lyft drivers made a median profit of $8.55 — before taxes. In other words, more than half were earning less than their state’s minimum wage, and one in ten were actually losing money.

Uber has also previously admitted to underpaying its drivers in New York by approximately $45 million, and made a $20 million settlement to drivers in January 2017 for making false promises about earnings and car financing.

But major markets are finally cracking down on Uber. Last November, a British employment tribunal ruled that Uber drivers needed to be classified as workers and receive protections such as minimum wage and paid time off. In April last year, Uber threatened to leave Seattle over the city’s collective bargaining law, which some drivers at the time were ecstatic about.

“Uber came and killed my business,” Tewodros Ashene, an Ethiopian immigrant, told the Guardian. “If Uber leaves Seattle, it’s good, I can restart my limo business.”