Commission Destroys Uber as a Viable Business

Uber is a rideshare app that the California Labor Commission has ruled is an employer that owes employment benefits.

As the economy get worse, developing new ways of living more cheaply becomes more and more important. Ridesharing technology is one of those revolutionary innovations. I have argued that it has the potential to end the day to day torments that are behind the protests in Ferguson. Taxi Cab companies are even demanding bailouts because of ridesharing services.

But now a judge in California has delivered a deadly blow to one of the major rideshare services, Uber. Reuters reports, “In California, Uber driver is employee, not contractor.”

A driver for Uber is an employee, not a contractor, according to a California ruling that eventually could push up costs for the smartphone-based ride hailing service and hurt the closely watched start-up’s valuation.

The California Labor Commission’s decision could ripple through the burgeoning industry of providing services via smartphones, with potential implications for other “crowdsourced” services such as Uber rival Lyft, chore service TaskRabbit, and cleaning service Homejoy.

The ruling – which Uber insisted applied to only one driver – was the latest in a series of legal and regulatory challenges facing the company and other highly valued start-ups in the United States and other countries.


Classifying Uber drivers as employees could mean considerably higher costs for the company, including Social Security, workers’ compensation and unemployment insurance.

That in turn could affect its valuation, currently above $40 billion, and the valuation of other companies that rely on large networks of individuals to provide rides, clean houses and other services.

Because it is appealing, Uber will not have to change the way it does business, for now.

So basically, because one person wanted a personal payday, the existence of several new innovative companies is now being threatened. That person sued for benefits as an “employee” rather than a contractor, and the California Labor Commission sided with this complainer.

Does that mean all the contractors who work with Uber in California will now get benefits paid back to them? Of course not.

The law requires employers to do things that raise the cost of employing people. What that means is that fewer people get employed. People who want to work as contractors can’t be hired because the government makes it too expensive to do so. So instead of getting contract work, people remain unemployed, all because of the law claiming to want to “protect” employees!

If all the people who have worked for Uber as contractors suddenly demanded employee compensation be paid to them, then none of them would get anything. Uber would simply go out of business.

Uber made everyone better off. People who needed rides were better off. People who had vehicles and needed the income were better off.

Now, thanks to the California Labor Commission, if Uber’s appeal is turned down, getting transportation will become more expensive and people who now work as contractors will lose that income.

Everybody loses except traditional taxi cab companies. Why should they force us to subsidize them against our will? Obviously, consumers prefer ridesharing.

All these required benefits are hurting the economy and hurting businesses. The government has no business dictating to us how we should contract with one another.