What to Call an Uber Driver

A California judge said that Uber could owe nearly 160,000 drivers 57.5 cents a mile. Tips that drivers never received and phone expenses could be a part of the settlement.

Uber says it will appeal.

Where are we going? To deciding who is an Uber employee.

The Gig Economy

Imagine a driver awaiting the “call” from Uber. She grocery shops until someone needs a ride. Uber determines the fare and what she gets paid. Done with that “gig,” she goes home. She might let Uber know she is available again during that day, the next day or in a week.

As an Uber employee, she would have been “engaged to wait” for the next fare rather than “waiting to engage.” Paid for her idle time, entitled to at least a minimum wage, to Social Security and to other benefits, she would have had a relationship with Uber that the law helped to define. From her end, going home would not have been an option.

On the other hand, as an independent contractor, she would have had considerable flexibility and said precisely what she would and would not do. Naming her pay, it is likely that her relationship with Uber would have been rather temporary.

You see where we are going. Neither an employee nor an independent contractor, this woman is a new kind of worker. In a recent paper from the Hamilton Project, economists Alan Krueger and Seth Harris suggest we classify her as an “Independent Worker” to whom new local and national legislation give appropriate protections, rights and obligations. The firm then becomes an “intermediary” that pairs independent workers with customers.

The intermediary firms to which Krueger and Harris are referring have emerged in the gig economy. Below, you can see how their popularity skyrocketed during the past four years:

And yet we still have the courts trying to use old worker classifications.

Our Bottom Line: “A Third Legal Category”

Market economies flourish with clearly established rights and obligations.

When I sign a contract, I don’t even wonder if the law will enforce it. If I get a patent for a new drug, I know, for now, it is mine. Reducing transaction costs, these kinds of laws can make doing business easy.

By contrast, the new kind of worker in the gig economy needs the law to do some catch up. Otherwise, ambiguities will retard innovation and create inefficiencies for workers and businesses.