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Uber’s flotation: from law suits to the stock market

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Treacherous legal waters for the tech titan

The world’s favourite taxi App, Uber, lists on the New York stock exchange today anticipating raising over $90 billion (£69 billion) in the process.

But the San Francisco-based tech disruptor arrives at this point with a string of legal cases against it — and with many battles yet to be won or lost. From class action claims in a number of states in the US to rulings in the European courts, Uber’s list of legal claims is long and getting longer.

Perhaps the most important — and the one as yet unresolved — relates to the status of its drivers: in a number of jurisdictions including the UK, courts are grappling with whether or not Uber drivers should be classed as employees or self-employed.

In the UK in December of last year, Uber lost its appeal against an Employment Tribunal decision that found its UK drivers qualify as workers not as self-employed and are thereby entitled to, among other things, the minimum wage and holiday pay. Uber has indicated it will appeal the issue to the Supreme Court.

In the US, Uber settled claims against drivers in California and Massachusetts (to the tune of $20 million (£15 million) on similar issues agreeing to certain driver protections without reclassifying its drivers as employees.

For Uber, the problem with the driver-status cases is that its business model is in part reliant on them not being fully-fledged employees and thus not embroiling the gig-economy-modelled operation in employment-related regulations and obligations.

Indeed, Uber cites this issue in its pre-listing disclosure documents. It writes: “Our business would be adversely affected if Drivers were classified as employees instead of independent contractors.”

Beyond the driver-status cases lie other treacherous legal waters: there are legal claims relating also to alleged trade secrets breaches (brought by Waymo), data breaches, sexual harassment claims, and various US government-agency investigations. One of the more recent cases decided in March of this year was a bit of good news. It concerns one of Uber’s self-driving cars that involved the death of an individual: prosecutors in Arizona did not hold Uber criminally liable for the crash.

Perhaps all this litigation is just par for the course for a modern business. More likely it is only to be expected if you disrupt the market in the way that Uber has. The word ‘uber’ is used in German to mean ‘above’: Uber’s success is that it is operating ‘above’ the rules that everyone had, until it came along, got used to.

Only yesterday, disgruntled drivers organised a strike against Uber to coincide with the company’s New York listing, highlighting the stark contrast between what protestors say Uber executives will gain by the listing ($$$$$$$ basically — with Uber’s founder set to benefit by around $7 billion (£5 billion)) compared with a typical driver’s take home pay of £11 per hour.

Uber’s chief legal officer, Tony West, formerly an assistant attorney general under the Obama administration who also spent time at another US giant, Pepsico, certainly has his work cut out for him.

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19 Comments

Anonymous

Before LC toxic comments kick in: really interesting piece, well done Polly.

I think I would have liked to see more commentary on the implications of the UK courts’ decisions so far in classifying drivers as employees and how Uber might be able to adapt its business model to keep delivering its competitive fares should the UKSC uphold the previous rulings, though. Since Uber is a pioneer in the gig-economy, it’s safe to say that whatever it decides to do, will likely shape the behaviour of all its competitors.

Anonymous

Was it not “workers”, not “employees”?

Anonymous

I’m not sure whether the drivers being workers/employees/contractors will have that much affect long term.

Uber’s goal seems to be to develop self-driving cars with a view to replacing the need for many people to own their own vehicle.

The drivers are just a temporary expense until self-driving tech is ready.

Anonymous

Do not destroy the LC business model. Most of people visit this web-site just to read the comments.

Kronos

Pah! Uber – a titan?

Anonymous

Just fuck off mate, you’re not funny.

Anonymous

So racist! Reported.

Anonymous

True! Quite shocking

Anonymous

A problem Uber has, which is yet to be resolved, is that it’s not profitable. It’s success is dependent upon it providing cheaper fares than the alternatives, it can only seemingly do this (in the UK, at least) by operating a model which appears to fall between gaps in the law. If those gaps are plugged, it’ll invariably become more expensive to use and less likely to turn a profit.

Anonymous

Its also more convenient than booking a taxi. Particularly if youre in an unfamiliar city where you may not know the number to book a local taxi or what the prices are etc.

Anonymous

Brothers! Sisters!

We need to end the gig economy!

Make employment real again!

And increase wages for public sector heroes!

VOTE CORBYN TO TAX AND UNIONISE UBER

FOR THE MANY, NOT THE FEW!!!

Anonymous

I have a genuine question: As Polly quotes, in the Form S-1 Uber states “Our business would be adversely affected if Drivers were classified as employees instead of independent contractors.”

My reading of this sentence suggests that the issue of whether drivers are employess or contractors is (a) yet to be determined; and (b) (more tenuously) the direction of judicial travel is in favour of the drivers being contractors. Both are wrong.

The current state of play is that drivers are workers, an intermediate status between employee and contractor – but one that carries various rights (NMW, discrim protection, etc) and means that Uber needs to pay VAT on its fares.

The law as it stands is that they are workers. That was the finding of the CoA. The SC might make a different finding (and Uber are appealling) but as at today’s date – and certainly when the filings were submitted – it seems to me that, at least in this jurisdiction, the statement made was at best misleading.

So I guess my question is, as someone who knows not how straightforward one needs to be in these documents, have Uber done a bad?

Anonymous

I would be amazed if the Supreme Court reached a different conclusion on worker status for two reasons, firstly, the tests are not unique (neither is Uber), and both the ET and CofA found worker status, and secondly, the Supreme Court is ultra pro-worker, pro-individual etc, ie they interpret the law in favour of individuals in most big cases eg the Unison ET fees case. Uber need to make their model work within the confines of UK employment law.

Anonymous

“there are legal claims relating also to alleged trade secrets breaches (brought by Waymo)”

Waymo’s suit was settled in Feb 2018…

I know LC is hardly the FT but this is over a year out of date

Anonymous

Don’t worry. Tom and Alex are useless arseholes.

Anonymous

So is your mum!

Anonymous

I would be amazed if the Supreme Court reached a different conclusion on worker status for two reasons, firstly, the tests are not unique (neither is Uber), and both the ET and CofA found worker status, and secondly, the Supreme Court is ultra pro-worker, pro-individual etc, ie they interpret the law in favour of individuals in most big cases eg the Unison ET fees case. Uber need to make their model work within the confines of UK employment law.

Short seller - hoping for a market crash

Only hype driven idiots will buy into this IPO as a long term investor, considering the potential for a negative ruling from the Supreme Court. A ruling that deems Uber employes will set a precedent that could potential reduce the profitability of its business model to a significant degree. This anticipation is reflected in its form S1 risk disclosures. Perhaps this is why Uber is so desperate to tap the public capital markets. Most likely its bankers and insiders are seeking flip the stock before an adverse ruling casts doubts in the long term prospects of its business model.

Anonymous

Yeah but it’s more convenient than booking a taxi so it must be good lol!

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