How Drivers Can Beat Uber at Its Own Game

By forming their own corporation, ride-share workers could win leverage over companies that refuse to consider them employees.

How Drivers Can Beat Uber at Its Own Game

By Hiba Hafiz (New York Times)

Uber and other ride-sharing companies are locked in all-out battle with their drivers over what might seem like a fairly straightforward question: Are they employees of the companies or not?

The drivers notched a victory last week when the California Legislature took another step toward codifying a state court decision that expanded the definition of “employee.” Uber and Lyft, to sidestep this possible change, are offering drivers a “workers’ association,” that would represent drivers but would not have collective bargaining power, in exchange for their acknowledgment that they are not “employees,” who would be entitled to a minimum wage and other protections under labor law.

At the federal level, meanwhile, the companies have benefited from opinions by the National Labor Relations Board and the Department of Labor that their drivers are “independent contractors” without the protections and benefits that employees are due.

The line between “employee” and “independent contractor” status is dangerous territory for drivers, who have undertaken several recent collective actions protesting the company and its working conditions. On May 8, the day before Uber’s initial public offering, drivers engaged in an international strike to highlight the risks of investing in a company that, they say, succeeds by avoiding compliance with labor law. More recently, Uber and Lyft drivers, saying they had suffered cuts in their pay, coordinated a price surge at Reagan National Airport and other cities by turning their apps off and on at the same time a few minutes before plane landings.

These coordinated actions could leave drivers vulnerable to antitrust liability. Ordinarily, workers’ organizing is protected under labor law. But ride-share drivers’ stubbornly murky status makes it unclear whether they are entitled to the labor law’s shield.

Without that shield, their coordination could be considered as amounting to illegal price-fixing by independent contractors, who are supposed to be competing to provide services. More broadly, group boycotts for better compensation could also violate antitrust law.

Uber has already used antitrust law to block driver organizing. When Seattle tried to grant Uber drivers collective-bargaining rights, the United States Chamber of Commerce, suing on behalf of Uber, successfully argued in federal court that the city ordinance was pre-empted by the federal Sherman Antitrust Act, which forbids collusion by independent contractor cartels.

Ride-share drivers do have another option: incorporating themselves.

Uber and Lyft have deftly maneuvered around labor laws to avoid obligations to drivers; drivers should similarly take advantage of legal loopholes available to them. Under antitrust law, “single entities” can be immune from antitrust liability, and incorporated joint ventures can set prices where price-fixing agreements between competitors would be allowed. Incorporating as Uber Drivers Inc. could allow drivers to beat Uber at its own game.

Under the Supreme Court’s 1984 decision Copperweld v. Independence Tube, entities within a single enterprise cannot “conspire” in violation of the Sherman Act. The Supreme Court has also found that while agreements between direct competitors to fix prices, restrict output or boycott others are unlawful, joint ventures created by competitors are given much more leeway.

If drivers incorporated their own joint venture, they could reduce their antitrust liability exposure risk while protecting their ability to coordinate in their negotiations with ride-share companies and their interactions with customers. Drivers could maintain the same compensation structure and flexibility as they do contracting directly with the platforms — working flexible hours and receiving per-ride salary commissions — while donating a portion, equivalent to the amount they might otherwise pay in union dues, to their newly formed Uber Drivers Inc.

Any refusal to deal with the company — by collectively switching off the app, for example — would be a decision of a “single firm” not to deal with a particular purchaser. Such “unilateral refusals to deal” are almost always held to be legal under antitrust laws. If Uber sued, the drivers could argue that Uber Drivers Inc. allows them to pool resources and reduce insurance, repair and accounting costs as well as provide vehicle financing and selection, cheaper health insurance and access to better retirement plans for drivers. All of these would reduce their costs and increase safety for ride-share passengers.

Further, drivers could develop more longstanding relationships with passengers, competing with Uber “off the app” to provide sales and discounts to customers of Uber Drivers Inc. And the joint venture would reduce their advertising costs.

Uber, Lyft and other virtual marketplace companies, like Handy and TaskRabbit, have emphasized, in lawsuits, public statements and even lobbying efforts coordinated through the app that they are not “employers” in part because their service providers are not barred from working for other apps or having their own businesses. So if Uber and Lyft now try to forbid drivers to siphon off their customers, they could risk exposure to labor and employment law liability.

Of course, there are risks to this strategy. Many drivers value the ease of earning money through ride-sharing apps, so why would they want to form a collective driving business? And Uber could refuse to deal with Uber Drivers Inc. by blacklisting drivers who join or recruiting replacement drivers. In other words, Uber Drivers Inc. could face many of the same retaliatory tactics (lockouts, replacement workers) that labor unions face in disputes with powerful employers.

But just as unions can prevail through broad recruitment, organizing and solidarity, an incorporated joint venture of Uber drivers could win if it attains a critical mass of membership — enough to wield countervailing power against Uber, even in just one city. If drivers are unable to win protections to form a union, incorporating may be the only way to gain leverage over Uber in negotiations over compensation and working conditions.

The history of labor organizing suggests that the benefits to workers of acting together — whether that is as a corporation, a limited liability company, a workers’ cooperative, or any other corporate form — can often outweigh the costs and difficulty. Incorporation can level the playing field, allowing drivers to secure not just higher wages but also health care benefits, insurance and someone to represent them when they feel the company has unfairly “deactivated” them.

Incorporation is no replacement for robust labor law protections. But until federal and state legislatures expand employee protections or antitrust immunity, drivers should be just as creative as Uber has been in taking every advantage available to them under the law.

Hiba Hafiz is an assistant professor at Boston College Law School.

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