Uber reclassifies UK gig drivers as "workers" — now it could have a precedent problem

Thursday, March 18, 2021 by Robinhood Snacks | Disclosures

Don't know what a Nissan Sentra looks like... Didn't see it coming: Uber lost a major labor battle last month, when the UK's Supreme Court ruled that its drivers are entitled to a minimum wage and other worker benefits. This week, Uber made the worker reclassification official.

  • Fresh status: Uber granted its 70K UK drivers a new (less gig-y) employment status that includes vacation pay, pensions, and a minimum wage.
  • Fresh costs: The UK is one of Uber's largest markets, making up ~6% of gross ride bookings at the end of 2020. So the shift could be pricey...

But not as pricey as you'd think... Uber usually doesn't pay its drivers wages — it just connects them to riders, then keeps ~25% of the fare. While the new UK benefits sound costly, they're not as expansive as they sound.

  • What disappointed labor activists: Drivers are guaranteed minimum wage only after they've accepted a trip (not if they’re just in the app looking for work). Also: Uber Eats delivery drivers aren't included in the change.
  • Uber says the average driver already makes more than the UK minimum wage of ~$12/hour. And that it would be illogical to pay them while they're potentially working on another app (like Lyft) at the same time.

The real story isn’t the details... It's the precedent. In November, Uber scored a major victory when CA voters said "Yes" to Prop 22. Uber had threatened to leave CA if it was forced to reclassify gig drivers as employees. But now that Uber has given UK drivers a new status, it could inspire more labor activists to push for change globally (and more lawsuits). That precedent is likely why Uber stock sank 4% yesterday.