Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Insanity

Uber Drivers Unionize in New York

Recent news stories are casting serious doubt upon Uber Technologies Inc.’s supposed $62 billion to $68 billion valuation. Even though investment bankers seem to love the ride-hailing app; the company behind it is facing serious legal and labor troubles – that could radically change its business model.

One recent development could change everything about ride-hailing; Uber drivers in New York City have unionized. Uber drivers in the Big Apple can now join something called the Independent Drivers Guild; or IDG, which will act as a mediator between the company and drivers, RE/Code reported.

The IDG is not strictly a union but it is associated with one; the International Association of Machinists, or IAM. Instead of a traditional union, the IDG sounds a lot of like entertainment industry organizations like the Screen Actors Guild (SAG) or the Writers Guild of America; which represents TV and movie writers.

Like Uber and Lyft drivers; writers and actors are independent contractors that get paid on a per gig basis. Yet they have organizations that give them the ability to strike and engage in collective bargaining. The organizations also provide services for members – the SAG famously maintains a nursing home for retired actors in California.

“Drivers will also gain access to discounted legal services, life and supplemental disability insurance, education courses and roadside assistance, along with an online worker center, providing a central hub for driver assistance and resources,” an IAM press release stated. Other services the Drivers Guild will offer will include a legal defense fund, a disability fund, retirement savings accounts and an immigration assistance fund, Re/Code reported.

Uber is working with at least one other labor organization – the Freelancer’s Union according to Re/Code. That group provides a host of services for freelancers including insurance. This will give Uber drivers outside New York, access to more benefits.


Why a Union could be good for Uber

Such an arrangement actually makes a lot of sense for Uber because it helps the company avoid conflicts; including labor strife and lawsuits. Lawsuits could be the ticking time bomb that ultimately destroys Uber in the United States and Canada.

Current and former Uber drivers in California and Massachusetts could win up to $852 million in damages in a federal lawsuit filed in San Francisco, Reuters reported. A judge has unsealed court documents in which attorneys for Uber drivers estimate the service owes them $730 million in expense reimbursements. Uber itself admits it owes drivers $429 million in some of the same documents.

The damages stem from the classification of Uber drivers as contractors. Lawyers for the drivers are arguing that their clients are tipped employees; who would be eligible for a minimum wage, unemployment insurance and other benefits under state and federal laws. Uber is maintaining that the drivers are independent contractors, who are only eligible for cash payments under the law.

The documents also indicate that Uber is trying to negotiate a $100 million settlement that keeps drivers as independent contractors; and preserves its business model. RE/Code writer Johana Bhuiyan noted that the proposed settlement and the agreement with the IDG looked identical.

By preventing labor troubles and rationalizing its relationship with drivers; a union could save Uber a lot of trouble and reduce its legal bills. The IDG could help Uber in another way, by giving it political muscle for its fight against local governments.

Uber and Lyft banned in Austin

Uber and Lyft both suspended services in the hipster mecca of Austin, Texas, on Saturday May 7, 2016, because of city regulations, The Austin Statesman reported. The city is requiring all ride-hailing drivers in Austin to get fingerprint-based background checks by February 1, 2017 – something that Uber and Lyft maintain is too expensive.


The networked-transportation companies pulled out after Austin voters rejected Proposition 1; a ballot measure that would have repealed the fingerprint requirement. Legal challenges to that measure have been filed in Austin.

Another Uber service; UberEats which offers food delivery, is still up and running in Austin, The Statesman reported. Austin residents that want to use Uber or Lyft will have to leave the city limits to catch their rides. UberEats can still function because it only carries food.

The IDG could help Uber in its battle against the city in several ways. Most importantly, its membership would form a constituency of voters; that politicians would have to pay attention to particularly in low turnout city elections. Like other unions, the Guild itself would hire lobbyists and make campaign donations to further its interests, which might mirror Uber’s.

Finally, the IDG would presumably be as opposed to the strict background checks as Uber. That would give the company an ally when it battles local governments, something that it is happening all over the United States.

It looks as if unionization might help Uber survive. Uber is demonstrating that the gig economy could be the salvation of the American labor movement.