Uber warns that it could seriously damage its business if drivers were considered employees instead of contractors

Christophe Morin/IP3Uber CEO Dara Khosrowshahi
  • Uber filed to go public on Thursday, and it listed the employment status of drivers as a risk factor that could negatively impact its business.
  • Currently, Uber drivers are independent contractors, which means they’re not subject to requirements around health care, minimum wage, or overtime.
  • Right now, the employment status of Uber drivers is being challenged in courts and investigated by government agencies, but the company maintains its stance that drivers should be considered independent contractors.
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Uber publically filed its S-1 IPO paperwork on Thursday – and warned that its business would be adversely impacted if its drivers were to be classified as employees instead of independent contractors.

Drivers are core to the ride-hailing company’s business. But as independent contractors, those drivers aren’t subject to requirements around minimum wage, overtime, or healthcare, let alone other benefits and regulations.

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Uber has filed to go public in what could be the biggest IPO in years

In the filing, Uber maintains its stance that this is the most suitable arrangement for its drivers.

“We believe that Drivers are independent contractors because, among other things, they can choose whether, when, and where to provide services on our platform, are free to provide services on our competitors’ platforms, and provide a vehicle to perform services on our platform,” the S-1 said.

However, not everyone agrees. As Uber itself notes in the filing, it’s facing both lawsuits and investigation from labour and tax authorities over its practice of classifying drivers as independent contractors. In March 2019, Uber reached a settlement where it agreed to pay $US20 million to drivers on the platform in California and Massachusetts, it says in the filing. This is subject to a final hearing in July 2019.

Should Uber be forced into changing its approach, the company warns, it could eat into the bottom line.

“If, as a result of legislation or judicial decisions, we are required to classify Drivers as employees, we would incur significant additional expenses for compensating Drivers, potentially including expenses associated with the application of wage and hour laws (including minimum wage, overtime, and meal and rest period requirements), employee benefits, social security contributions, taxes, and penalties,” the S-1 filing said.

Notably, rival ride-hailing service Lyft gave investors a similar warning when it filed its own S-1 earlier this year.

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