Uber’s $25 Billion Dollar Bailout
A timeline of how gaps in employment law forced the federal government to spend billions to subsidize the cost of paid leave and unemployment benefits for millions of Uber drivers
Senator Mark Warner of Virginia sends a letter to Uber, Lyft, Instacart, Postmates, Grubhub and DoorDash urging their contractors to follow the CDC guidelines to stay home, but saying they should not bear financial hardship. This letter is complemented by Gig Workers Rising posting a petition for paid leave of Coworker.org.
During this time, I was having regular conversations with senior leadership at the major gig platforms, including Uber, to help push for and design their paid leave policies. The platforms had created coronavirus task forces, led by executives governing operations in North America, legal, risk, and policy.
Pre-corona, offering paid leave was very risky for platforms, given that it would suggest drivers and couriers are employees, rather than independent contractors, fundamentally threatening the business model that has enabled brazen scale. But the Warner memo solidified that, from both a public health and public relations perspective, platforms had little choice, as even those diagnosed with the virus or told to self-isolate were continuing to work in desperate need of money.
Uber announces its paid leave policy. I had several conversations with Uber on how to design these paid leave policies, given the volatile and intermittent nature of independent work. Unlike normal paid leave, which accrues at a rate of one hour per 30 hours worked and pays out at the hourly rate, independent drivers and couriers had not been accruing time, were not legally entitled to paid leave, made variable hourly earnings, and worked variable hours.
There needed to be design decisions about who would qualify, how payouts would be calculated, and how long the paid leave would cover. Ultimately, platforms decided to pay out to those who had been active on the app in the past few months and used a historic weekly average of earnings over several months to calculate what that payout would be. Determining the payout based on historical wages over several months was far fairer that using the previous week’s earnings, given that growing awareness of the pandemic’s gravity had tempered demand. However, the most controversial criteria of both Uber and Lyft’s paid leave policies is that you had to either be diagnosed with COVID-19 or specifically told to self-isolate, both provable by a doctor’s note, in order to qualify for the two weeks of paid leave. Food delivery companies followed suit. Workers outside of these two conditions faced a painstaking choice: follow public health guidance and stay home, exposing their families to the threat of eviction, or continue to man what little ride requests flowed in, exposing their families to the threat of the virus. Posts like the one below became commonplace on driver Facebook forums.
Anil Subba, a 40-something Nepalese immigrant who lived in Queens, dies of coronavirus. He allegedly contracted the virus while driving a sick passenger from JFK airport to Westchester the first week of March. However, because his family cannot prove how he contracted the virus, his family will receive no compensation for his death. Employers are mandated by law to purchase workers compensation insurance for all employees, which pays out lost income, medical expenses, and a death benefit in the event that a worker is killed or injured on the job, but independent contractors are not covered by this protection. New York City is the only geography in which a 2.5 percent consumer surcharge on rides funds a workers compensation fund for professional drivers, regardless of their employment classification, called the Black Car Fund. Had the family been able to prove that Anil contracted coronavirus through his work, they would have been entitled to a $50,000 death benefit from the Black Car Fund. The family instead received nothing.
Congress passes the $2 trillion CARES Act, and $250 billion is allocated to Pandemic Unemployment Assistance (PUA), which expanded unemployment benefits to independent contractors and self-employed individuals for the first time in history. The weekly benefit rate ranged from a minimum of ~$150 to a maximum of ~$500, varying by state. These contractors also qualified for the $600 weekly bonus. Benefits could be paid retroactively through January 27, PUA would extend through June 30, and the weekly $600 bonus through July 31, up to a total of 39 weeks.
Every company with full-time employees is required to pay 5.4 percent in federal unemployment taxes on the first $7,000 of each worker’s income, totaling $378 per employee. If Uber had been asked to comply with the same rules, they would have contributed $756 million to the system annually, based on their driver base of two million people.
Assuming each driver received an average weekly payout of $300 plus the $600 weekly bonus for an average of 14 weeks (mid-March through the end of June), each driver will receive $12,600 total. This dwarfs the $1,500 in average company-sponsored paid leave benefits contributed by the company’s voluntary policy. Assuming each of its drivers receive unemployment, a fair assumption given that anyone meeting a state’s wage requirements qualifies, Uber received a bailout to the tune of $25.2 billion from the US government without historically paying into the unemployment system or being required to pay unemployment taxes in the future.
Based on criticism of the limited scope of its paid leave policy, Uber extends coverage to those with have been told to self-isolate by a doctor because of pre-existing health conditions.
Although the company reported paying out $3 million in paid leave to the 1,400 drivers who tested positive for COVID, hundreds of drivers took to Facebook forums and Twitter to report that, despite filing an application and meeting the criteria, they had received no response from the company or their claim had been denied. When filing an application, Uber made no promises on when a decision would be reached, much less funds deposited. Drivers had no legal recourse against this slow and inconsistent response, given that this paid leave program was a voluntary company initiative, rather than mandated by law. A trail of negative press highlighted the discrepancy between the company’s promises and practices on paid leave, and journalists and plaintiff lawyers took to advocating for individual cases to be paid.
Half of states are accepting pandemic unemployment assistance (PUA) applications. Half will defer accepting applications until later in the month or the start of May, meaning that most drivers have had to go over a month with no income.
I wrote blog posts on the PUA application and certification process in different states and answered scores of questions from panicked and confused drivers, many of whom spoke English as a second or third language. Driver Facebook forums were swarming with questions from what address to list for Uber, which box to check as to why you weren’t working, how far back pay would extend, whether working part-time would jeopardize benefits, and when and how payments would be received. One wrong answer and thousands in benefits would be rejected or delayed by weeks.
A great deal of this confusion could have been alleviated by Uber communicating in clear language how to apply for PUA or proactively sharing earnings data with state unemployment agencies, as is done for full-time employees, to pre-fill many parts of the application. No communication was sent. Instead, driver representation groups like Gig Workers Rising and the Independent Drivers Guild partnered with legal aid centers and law clinics to film tutorials and host question and answer sessions on how to apply for benefits. While this covered big states like California, Washington, and New York, those in smaller states were given little to no guidance.
The state of California sues Uber and Lyft for misclassifying workers. Since Assembly Bill-5, a law confirming that Uber drivers should be classified as full-time employees, went into effect in January, Uber should have been treating workers as full-time employees, which includes paying unemployment taxes, offering paid leave, and securing workers compensation. Instead, Uber and other gig platforms have each pledged $30 million to fight AB-5 in a November ballot initiative. The law suit would allow drivers to seek up to $2,500 in penalties going back four years, which would cost the company around $500 million.
The weekly $600 in additional unemployment benefits is set to expire at the end of this month, which would force millions to reevaluate whether they need to return to the precarious work of driving in a pandemic, exposing themselves to tens of strangers per day. Drivers may be more willing if they were guaranteed personal protective equipment. But classification tests that determine whether a worker is an independent contractor or employee are clear that if a company is providing the equipment required to do a job, that worker is likely an employee, not a contractor. So despite Uber pledging $50 million towards protective equipment for drivers, drivers have had to purchase their own car partitions, which cost around $200, gloves, masks, and hand sanitizer. Lyft has even opened an online store in the past three days, charging drivers for PPE.
During coronavirus, the federal government chose to bail out gig platforms, of which Uber is the largest, rather than let millions of workers go without paid leave or unemployment benefits or be forced to continue working without company-sponsored PPE or workers compensation.
But we clearly need a long-term solution and cannot accept billions in tax-payer dollars subsidizing a publicly-listed unicorn. While legislation forcing reclassification like AB-5 in California threatens to limit the flexibility of platform workers, it does grant them labor protections available to all full-time employees. An alternative to AB-5 is that companies are mandated to offer benefits to independent contractors. Companies should contribute to state and federal unemployment, accrue paid leave, and secure workers compensation for all workers, regardless of their classification status. Only then can we ensure that no worker needs to make the heart-wrenching tradeoff between his life and livelihood, as millions were asked to do during this pandemic.