Will Uber Go Under?

     The idea occurred when one of its founders was unsuccessfully trying to find a cab in Paris. The result was Uber, one of the first companies to experiment with peer-to-peer ridesharing. The way it works is a person who wants a ride downloads the Uber app onto his or her smartphone (or laptop). When that person wants a ride, he or she taps the Uber app on the smartphone. Uber detects the rider's location by GPS and dispatches a car. The car is driven by its owner, who is willing to give people rides for compensation. The person who requests a ride is informed how long it will be before pickup. Car and driver details are also available. Estimated fare can be obtained by inputting the pickup and drop-off locations. Payment is via pre-recorded credit card---neither the driver nor the rider need to carry cash. Both drivers and passengers rate each other after the ride. If more than one person rides at the same time, they can split the fare and each credit card will be charged equally.
     Uber has encountered resistance from various quarters.
     1) Most jurisdictions in which Uber has attempted to operate have declared Uber illegal on the grounds that Uber drivers aren't licensed to perform ridesharing. The counter-argument is that there are no regulations with regards to ridesharing.
     2) Taxi cab associations have protested that Uber is competing unfairly, since Uber is not subject to registration fees and other regulatory hurdles. The counter-argument is that the taxi cab concept and modus operandi is outdated by software and smartphone technology.
     Recently, a new challenge to the Uber concept arose in California. Uber considers its drivers to be independent contractors. But what if they aren't?

     "Historically, the line between employee and independent contractor has been easier to draw. In California, independent contractors are generally treated as workers who serve multiple clients, have a high level of control over their work, and complete specific jobs over a limited period of time that fall outside the usual scope of their current employer’s business. Employees, by contrast, tend to be employed, supervised, and paid for a long period of time by the same one or two employers; their hours are more regular, and the way they do their work is more regimented. The legal problem for Uber and Lyft is that, by these standards, their drivers seem to fall squarely in the middle. Their hours are flexible—but only to a point. Uber, for example, has threatened to suspend the accounts of drivers who accept less than 90 percent of rides. The same is true of drivers’ control over their work. Uber and Lyft might not make drivers wear uniforms, but the companies do instruct them on other points—how to interact with passengers, what kind of music to play during rides—and threaten to deactivate drivers who don’t meet standards."

     Uber is actually being sued by drivers who claim that Uber is responsible for paying such expenses as gas and vehicle maintenance. And, if the jury decides that they are employees, Uber is on the hook for FICA, etc. That could be a big hit.
     Regardless of how Uber fares, ridesharing technology is too popular and rational to ban completely. It's been interesting to note that Uber can still operate its business in areas where it has a quasi-legal (or even illegal) status. Now that's what I call a characteristic of the shadow free market!