A U.S. district judge ruled Tuesday that Uber drivers in California can go ahead with a group lawsuit against the company, according to a widely reported story you've likely already heard about. The specific suit means the 160,000 California Uber drivers can press for tips, but the bigger issue in the suit is that the drivers would be treated as employees rather than contractors -- a significant change that would entitle them to benefits, unemployment and the right to unionize.
The change would call into question the legality of Uber's business model, a key factor in the arguments made by taxi and limousine companies regarding their calls for a level playing field. "In America, you're required to give employees benefits," president and CEO of the Dav El Transportation Network Scott Solombrino told me in late July. "The fact they don't not only is un-American, it also gives them a 40 percent advantage over those of us who do."
Though the judge ruled against Uber's effort to block the suit, Uber is likely to appeal. So it could be some time before the decision has much of an effect, if any, on the $50 billion company. But the case brings up a number of points I've been pondering about the sharing economy.
"I think 'sharing economy' is a very nice contradiction in terms," said Rufino Pérez Fernández, chief commercial officer of the Madrid, Spain-based NH Hotel Group, at a GBTA Convention panel discussion in July. "When I share something with a friend of mine, I don't charge him anything. I don't ask for a price. We share 60,000 rooms every day, if sharing means you can ask for a price."
Airbnb's head of global hospitality and strategy, Chip Conley, went on to clarify that the sharing economy really is about sharing the world's resources more effectively. While I accept that definition, I think the point made by Pérez, while humorous, raises interesting questions. Uber is oft referred to as a "ride-sharing" company, but to me, "ride sharing" is more along the line of the bulletin boards I remember from college: Someone is driving his or her car somewhere and is suggesting a carpool (whether money changes hands or not).
On the other hand, an Uber ride far more closely resembles a typical taxi or limo transaction: The customer pays someone to drive somewhere. Uber drivers, when working, are awaiting requests. They aren't just picking up people on their way to their own planned destinations; they aren't increasing efficiency via carpool.
While I believe Uber and other sharing-economy companies are offering a needed service, the sharing really seems more about the drivers sharing their cars with Uber than with their paying customers. The customers pay, and Uber (and Airbnb, for that matter), benefits from that transaction by providing the technology that connects everyone. Uber and Airbnb have created incredibly useful and effective technology; whether they represent transportation and hospitality companies, respectively, is at the heart of many current debates, both in our industry and among governments around the globe.
I'm not attacking the business model. The low-capital-investment, high-efficiency approach could represent the future of a lot of travel-related companies, and could fit nicely into business travel and meeting programs -- once we can agree on what laws and regulations must be adhered to. The multibillion-dollar question is how such highly valued technology companies as Uber and Airbnb will fare when more competing, more disruptive technologies hit the market to connect us with travel services.