Unraveling Uber’s Untruths

Uber has written millions of lines of code, but none of it changes the reality that drivers need to feed their family and pay their rent

Dan Teran


Photo: Robyn Beck/Getty Images

In 1938 Franklin Delano Roosevelt warned America, “do not let any calamity-howling executive with an income of $1,000 a day,… tell you… that a wage of $11 a week is going to have a disastrous effect on all American industry. The following day he signed the Fair Labor Standards Act (FLSA), for the first time establishing a federal minimum wage of $.25 an hour, a 40-hour workweek, and a ban on child labor in mining and manufacturing. New Deal initiatives, combined with the industrial boom of World War II, would not only usher in an unprecedented era of American economic growth but ensure that the wealth created was shared broadly with the burgeoning American middle class.

The United States in 2020 might look sadly familiar to FDR. In the past decade, we have returned to levels of income inequality and unemployment not seen since FDR sat in the Oval Office. In California, a new generation of what FDR called “economic royalists and sweaters of labor,” are howling calamity again, as they ask voters to support them in depriving gig workers of the basic protections of the Fair Labor Standards Act. They may have traded in the top hat and monocle for Allbirds and a Patagonia vest and the factory floor for the mobile app, but the story remains the same.

Last year, the California State Legislature passed AB-5, which establishes an “ABC test” for determining the degree of control a company has over its workforce, and therefore what the proper classification should be. Based on the test, California has ruled that many gig workers, including Uber drivers, should qualify for the protections of employment under the FLSA and subsequent legislation.

I think that Uber’s employees, riders, and drivers deserve better information than they are getting.

The FLSA and subsequent worker protections afforded to employees include a minimum wage, unemployment insurance, disability insurance, and, in California, paid family leave, paid sick leave, and vacation. They provide a foundation of security for tens of millions of American families and are especially critical today as we face a global pandemic.

Last month, Dara Khosrowshahi, the chief executive of Uber, published an op-ed in the New York Times arguing against giving Uber drivers these basic protections. Uber has continued to make the same case elsewhere as it champions an upcoming ballot initiative that would allow it to continue denying workers the rights of being employees. The company, along with other gig economy employers, is committed to spending over $100 million to make sure it’s drivers never see the benefits of employment.

While most working Americans can take a sick day, Uber drivers have been pushed to drive sick to put food on the table. Because they are deemed independent contractors, drivers lack proper training and are not empowered to speak up about unsafe working conditions, potentially contributing to the uncontrolled spread of Covid-19 in the United States relative to Europe.

What troubles me about Uber’s argument against reclassifying its drivers as employees is not that it advocates for a policy designed to enrich executives and shareholders at the cost of workers. By now we should expect no less. What troubles me most is the lack of integrity with which the key arguments are made. I think that Uber’s employees, riders, and drivers deserve better information than they are getting.

Through his writing and numerous recent interviews, Khosrowshahi has emerged as the face of the modern-day opponent of labor, the calamity-howling executive that FDR warned us about. In order to unravel some of the fundamental untruths of Uber’s case, I’d like to address some of his own words directly.

Why not just treat drivers as employees? […] Uber would only have full-time jobs for a small fraction of our current drivers and only be able to operate in many fewer cities than today.

The letter begins by introducing a false constraint that drivers would be required to work full-time jobs or that Uber would be obligated to provide full-time jobs. Surely Khosrowshahi and his colleagues are familiar with the part-time job. There is no state or federal law that determines a minimum number of hours an employee must work in any given day, week, month, or even year. About 23 million Americans hold part-time jobs today, and 8 million Americans hold more than one.

Did eliminating child labor increase the price of ladies’ hosiery? Probably. Was it the right thing to do? Absolutely.

To support this dubious claim, Khosrowshahi links to an opaque blog post written by an Uber employee. She says that shifting to an employment model would put pressure on Uber to consolidate working hours across fewer workers in order to manage costs that are fixed per employee.

There is no mention of how giving a better deal to drivers might impact the hundreds of millions of dollars the company is currently spending to recruit and onboard new drivers.

Rides would be more expensive, which would significantly reduce the number of rides people could take and, in turn, the number of drivers needed to provide those trips.

Uber has written millions of lines of code of software, but none of it changes the reality that someone has to drive you from A to B, and that that person needs to feed their family and pay their rent. The last time I rode in an Uber the driver told me he drove 19 minutes to pick me up. He then drove me for about 20 minutes, and I paid $19.70. Determining how much the average Uber driver makes per hour is a notoriously difficult task, but I would be surprised if after the cost of fueling and maintaining his vehicle he was making the New York City-mandated $15 minimum wage.

It is probably true that in order to provide the full benefits of employment to drivers, riders would be asked to pay a higher cost. However, is this a bad outcome? Did eliminating child labor increase the price of ladies’ hosiery? Probably. Was it the right thing to do? Absolutely.

It is okay to celebrate innovators without accepting their violations of labor laws as innovation.

If lower prices mean depriving drivers of the basic benefits of employment and other protections designed to shield our most vulnerable workers, then perhaps Uber should reconsider certain aspects of the operation that cannot operate profitably. It is okay to celebrate innovators without accepting their violations of labor laws as innovation.

More important than what I think is what drivers think: In public surveys over the last decade, the vast majority of drivers have said they don’t want to be employees because of how much they value flexibility.

Central to Khosrowshahi’s argument is that drivers do not want to be employees. He makes his argument by referencing another op-ed in the New York Times that is written by Harry Campbell, a former part-time Uber and Lyft driver and the founder of The Rideshare Guy, a blog and podcast for ride-share drivers.

Harry Campbell’s voice is far from independent. He collects referral fees from Uber and Lyft by recommending ride-hailing work to new drivers, and he is a paid consultant for “large corporations, startups, municipalities, researchers, and not-for-profits,” for instance giving feedback and product design recommendations to Lyft about its drivers reward program. This is no secret. Five years ago he stated publicly that he was making more than $20,000 a month on this enterprise. His entrepreneurship is commendable, but Khosrowshahi’s misrepresentation of the voice of the driver is not, nor is the New York Times’ failure to note this conflict.

Campbell’s article is titled “Uber Drivers Just Want to Be Free,” but in the article, he says “they’re essentially working an employee-like schedule but without any of the protections. That means no minimum wage, no unemployment insurance, no benefits, and no workers’ compensation. I can’t fault these drivers for pushing to improve their lives.” What, exactly, do drivers want to be free from?

In Campbell’s own words it sounds like the benefits of employment are exactly what drivers want… unless of course they were convinced that they could never have them and that the alternative to their current arrangement was no work at all. This is consistent with both Uber and Lyft threatening to shut down service in California before classifying workers properly, in a capital strike that would make even Ayn Rand blush.

A recent survey commissioned by Uber and other companies found that two out of three app drivers would stop driving if their flexibility was compromised.

The greatest myth perpetuated by all gig economy companies is that workers have to choose between flexibility and the benefits of employment. The flexibility farce is the cornerstone untruth upon which Uber and its peers have built their business. Providing employees with scheduling flexibility is a choice that is made by the employer, and at many companies is perceived as a benefit. Uber conveniently ignores this fact and instead chooses to intimidate their drivers into accepting the status quo.

If Uber fears the increased cost and responsibility of being an employer and taking responsibility for millions of people, I don’t blame them. It is hard. I have faced all of these decisions, and their consequences, as co-founder and CEO of Managed by Q. Managed by Q was the target of frivolous lawsuits, outside union agitation, and was held responsible when our employees screwed up on the job. We screwed up too. It is not easy to be a large employer, especially of a financially and economically vulnerable employee population. But shouldn’t we expect our highest-paid executives to solve our hardest problems? FDR warned of executives making $1,000 a day, what would he think of Khosrowshahi’s compensation package of over $40 million?

When Khosrowshahi joined Uber as CEO, he introduced a new company value: “We do the right thing, period.”

In 1938 unemployment was at 19%, nearly double what it is today. The opponents of the FLSA cried job destruction, called the bill unconstitutional, and were successful in killing the bill on the floor of the House the first time around. Roosevelt persisted and prevailed. In the depths of the Great Depression, millions of Americans got a raise. With 80 years of hindsight, it is clear that FDR did the right thing.

Today, Uber has the opportunity to be a leader and once again expand the protections of the FLSA to nearly 1 million workers at a time when they need it most. Instead, Uber is investing hundreds of millions of dollars to deprive their drivers, in many ways the same immigrant and minority workforce FDR sought to protect, of the very protections of the FLSA.

It took decades to know that the New Dealers were right and that a minimum wage could build the middle class, expand purchasing power, and grow the pie for everyone. We don’t need 80 years to pass to know what is the right thing to do here. I am not asking anyone to delete Uber, I am asking for Uber’s employees, drivers, and customers to rise to the moment and challenge Khosrowshahi to live by his own stated value, and do the right thing for the company and for our country.

Update: This article has been edited to clarify the role of Uber and Lyft in Harry Campbell’s business.



Dan Teran

managing partner @ gutter capital / founder + ceo @managedbyq