[By Carolyn Said] Uber is retooling its ride-hailing procedures, trying to insulate itself from having drivers reclassified as employees under AB5, California’s new gig-work law that took effect Jan. 1st. But lawyers said there are big gaps in its approach. Uber handed drivers more freedom and flexibility, allowing them to see upfront information on ride destinations and estimated fares, as well as to reject trips without penalties. It’s letting riders pick favorite drivers for scheduled rides. It’s also experimenting at three small California airports with a way for drivers to set prices. Under AB5 and Dynamex, the 2018 California Supreme Court decision it codifies, workers are presumed to be employees unless they (A) work free from a company’s control, (B) do work that is not central to a company’s mission, and (C) have independent enterprises doing that type of work. Uber’s revamp addresses only the “A” part of the ABC test, trying to show that the drivers are free of company control and direction,” said John Baum, a partner at San Francisco’s Hirschfeld Kraemer who represents management in labor cases. Hiba Hafiz, assistant professor of law at Boston College, agreed. “The changes wouldn’t move the needle … under the B and C prongs of the ABC test — they really just go to whether or not a court would likely find that Uber does not control and direct the performance of drivers’ work,” she said. Still, said Tiffanny Brosnan, a lawyer who represents management in labor cases at Snell & Wilmer in Costa Mesa (Orange County), addressing the first prong “is still critical when it comes to how federal agencies such as the Department of Labor and the IRS view independent contractors.” For Part C, drivers who work for other services, such as Lyft, DoorDash and Postmates, potentially could be considered to have independent businesses in the same field, Baum said. However, many drivers, especially those who work close to full time, stick with one service because Uber and Lyft incentives are tied to completing a certain number of trips in a fixed time period. Baum said he could envision Uber changing its business model to require that drivers do similar work for other entities. That might also mean changing its incentives structure. Brosnan noted that Uber highlighted in a recent blog post that drivers are free to work on other platforms at the same time. “That’s because if you have a driver who drives passengers for Uber and Lyft who also delivers food for Postmates, it’s easier to argue that driver has an independently established business,” she said. That still leaves Part B of the test, which Baum, Hafiz, Brosnan and numerous other lawyers say will be the hardest for Uber to prove. “It’s been dubbed the ‘Killer B’ for good reason,” Brosnan said. Uber said in a statement that its changes are designed “to preserve flexible work for tens of thousand of California drivers,” adding that the pricing tests “would give drivers more control over the rates they charge riders.” Uber maintains that drivers are not central to its core business because it is not a transportation company. Instead it is “a technology platform for several different types of digital marketplaces,” Tony West, Uber chief legal officer, said in a September media call. Baum said few would swallow that reasoning. “Everyone views Uber’s core business as giving rides,” he said. “It pairs you with a driver to go from Point A to B.” Hafiz said that Uber’s new policies may be an attempt to distance it from the business of rides and more firmly portray it as a business of providing software that matches drivers with riders. But she thinks the Dynamex precedent would scuttle that argument. “Dynamex was viewed to be in the delivery business because it obtained customers for driver deliveries, set the rate customers were charged, notified drivers where to pick up and deliver packages, tracked the packages, and required drivers to use its tracking and record-keeping system,” she said. “Uber does all those same things with respect to rides with the slight exception of fares.” Even if Uber’s price experiments spread throughout California, Hafiz thinks they won’t fly in court. Uber is letting drivers at the test airports either accept its original rate or ask for up to five times more, in increments of 10%, or even ask for less. The result is that drivers will be bidding against one another for rides. Uber has said that it may change this system, and has not committed to rolling it out statewide. “It’s a bit of a mischaracterization to say that Uber is allowing drivers to set their own fares,” Hafiz said. “They’re merely allowing a multiplier on fares they unilaterally set for certain routes, an experiment they can unilaterally reverse and which they don’t deploy in any other setting. The fact that Uber retains this ultimate authority to control fare-setting will be key in a court’s analysis.” Baum thinks some of Uber’s strategy may be to prepare to defend itself under Borello, the standard that predated Dynamex and is still in place in many instances. All the professions exempted from AB5 are not automatically granted immunity from reclassification — instead they are subject to the Borello test, a lower hurdle for companies to claim workers are independent contractors. Although Borello has more criteria than the ABC test, companies don’t have to satisfy all its factors. “It’s an easier test because all the elements are not mandatory as they are in the ABC test,” Baum said. “It’s more about weighing and balancing them.” The most important factor under Borello, he said, is who controls day-to-day work. Some of Uber’s ulterior motive in its changed procedures could be to position itself to claim that workers are independent contractors under Borello. “That’s far more likely to be successful than trying to pitch themselves as a completely different company” that’s not involved in transportation, Baum said. “I don’t think that passes a common-sense valuative test.” The very fact that Uber had the unilateral ability to tweak its business model underscores why it should be considered an employer under AB5, wrote Nayantara Mehta, strategic partnerships director at the National Employment Law Project, in a blog post. Its new policies “do not change the basics of how Uber exerts control: It sets fares, it takes the commission it wants, and it can take back whatever positive changes it makes when it wants to,” she wrote. The name of her post says it all: “Sorry, Uber, you’re still covered by AB5.”


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