Please ensure Javascript is enabled for purposes of website accessibility

Uber CEO Calls for "Third Way" for Gig Workers in New York Times OpEd

By Lou Whiteman – Aug 10, 2020 at 2:11PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Uber is caught in a battle with the state of California about how its drivers are classified.

The CEO of Uber Technologies (UBER 0.12%), caught in a battle with states about how the rideshare company classifies its drivers, proposed a new way to classify gig workers in a New York Times oped published Monday.

Dara Khosrowshahi in the newspaper column urged lawmakers in Washington to update labor laws to give contractors and other so-called gig workers more benefits without making them full-time employees.

"There has to be a 'third way' for gig workers, but we need to get specific, because we need more than new ideas -- we need new laws," Khosrowshahi wrote, adding the following observation:

Our current system is binary, meaning that each time a company provides additional benefits to independent workers, the less independent they become. That creates more uncertainty and risk for the company, which is a main reason why we need new laws and can't act entirely on our own.

A passenger on a ride share app.

Image source: Getty Images.

He suggests companies that rely on gig workers be required to create benefit funds that can be used by workers for needs ranging from health insurance to paid time off, with the amount an individual is allowed to take out of the fund based on the amount of hours they work.

Khosrowshahi estimates that under his plan Uber would have contributed $655 million to benefit funds last year; a driver in Colorado, for example, who averaged 35 hours a week would be eligible for about $1,350 in benefits.

He also says the gig economy and tech companies should be forced to provide medical and disability coverage for injuries incurred on the job.

The proposal comes as Uber is waiting for a ruling on a California law that aimed to reclassify gig workers as employees instead of contractors. Uber and other rideshare companies including Lyft (LYFT -0.97%) were the primary targets of the new law, and California and a number of the state's largest cities have sued Uber and Lyft for allegedly breaking that law.

At first glance, the proposal would appear to be a relatively easy escape from a thorny problem for Uber. Though Khosrowshahi does not get into full specifics of how much the company and its workers would contribute, $1,350 in total benefits per person is much less than what a company pays for a full-time employee.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.