You can't argue with success! I can. Uber is a five-year old company now valued more than 72 percent of any Fortune 500 company. I actually love the concept of Uber: it is disruptive, filling a need, an uber startup, and Uber's latest round of funding raising $1.2 billion at a $41 billion valuation is a confirmation of this from some of the world's top investors. This is all in spite of the fact that Uber coincidentally also happens to be one of the worst role models for small and medium sized businesses alike.
Those on top will always have its critics, but it is how Uber got there (or is getting there) that should really be addressed. Uber's rocket success will give similarly positioned startups the green light to be just as nasty and unethical.
In summary, Uber flaunts the law, deceives its drivers, deceives its users, and has a culture that gives little value to privacy.
Uber Drivers Take On More Risk Than They Know
Uber has an awesome and innovate app, but what many miss is that Uber basically operates as a franchise taxi company. Instead of the company bearing all these risks of costs and liabilities, they just shift it to individual owners. Unfortunately, most drivers do not quite understand this risk.
Misclassification as Independent Contractor
With FedEx Drivers being the latest target of misclassification of independent contractors versus an employee, Uber may be soon to follow. In a class action lawsuit against Uber, drivers allege they have been misclassified as independent contractors. The California case makes some compelling arguments including the fact that Uber's website advertises that "Uber is your on-demand private driver" and there are a litany of detailed requirements imposed on drivers by Uber. Uber's drivers are fully integrated into the entire business model–it is the business, leaving definite room for Uber to lose on this matter.
It may be an industry killer to declare Uber drivers as independent contractors, but it seems drivers could really benefit from at least some of the protections that are given to employees, such as minimum wage and reimbursement of expenses.
Uber Drivers Do Not Make $90k Per Year
Since the drivers are their backbone, Uber spends quite a bit of effort in recruiting. They do it a way that sets an unrealistic expectation for drivers. For example, on May 27, 2014, they stated that the median income for an uber driver in New York City is more than $90,000 per year; yet, when Uber actually released their numbers, it was revealed that an Uber driver would have to work close to 80 hours a week to make that amount.
While many would construe this as an outright lie, it has merely been discussed and somewhat ignored. Forget about the fact that this $90k number did not include the cost for the use of their car, gasoline, and the downtime between rides, this company-line that being a driver is like being a "small business entrepreneur" sounds more like they are trying to sell a pipe dream than an opportunity. The reality is that after all the math is done many Uber drivers may be barely making minimum wage. It is for this reason that franchises are so heavily regulated, requiring substantial disclosures so no franchiser can misconstrue the risk and reward.
Peter Thiel, a prominent VC known as a cofounder of PayPal, called Uber "the most ethically challenged company in Silicon Valley." Thiel, in his AMA, compared Uber to Napster alluding to the fact that much of Uber's operations around the word are considered illegal by city officials and other opponents.
In fact, in cases across the nation, from San Francisco to Tuscaloosa Alabama, drivers have been arrested for operating unlicensed taxis. Some drivers report even risking their license thanks to Uber.
Uber was recently sued in Portland and threatened to ticket Uber drivers for failing to operating without the city's permission. Uber's response to their drivers concerned about the possible fines is demonstrative of the company's culture–keep ridin'. Uber encouraged their drivers to continue their operation despite the city's protest and offered to pick up the tab of any fines that are incurred.
Thiel makes a great comparison to Napster. Great innovative company, but against the law. Some may see the copyright law protecting the profits of the music industry something slight. In fact, at the time, many of us had little to no remorse in stealing music on the P2P network.
The difference in leaving Uber unregulated is that the victims are not just record labels or taxi drivers, but we passengers as well. There is a reason that in almost every urban population cars for hire are regulated. These ordinances go beyond just a tax but are mostly designed to help protect the safety of the passengers just like any health and food regulation helps diners.
Granted, the current regulation for tax drivers is a little dated, but important nonetheless. Colorado has lead the movement of regulating Uber-like ridesharing programs that would require background checks, vehicle inspections, and mandatory insurance coverage.
San Francisco and Los Angeles District Attorneys Sue
Just today, the District Attorney of San Francisco announced that he and Los Angeles District Attorney filed a lawsuit that accuses Uber of "false or misleading statements to consumers" and for violating California law. Again, it comes down to Uber's so-called industry-leading background checks that apparently have very little value. The lawsuit also refers to the "Safe Riders Fee" that is charged to customer related to the increased cost of background checks.
List of Uber Cities in Operating Against the Law (According to Opponents)
Almost half of the cities in the U.S. that Uber operates are said to be illegal by its opponents. I will need help from you readers to keep this updated, but as of the date of publishing, here is a list of cities that Uber operates and whether the city or other opponents has complained that they are not authorized to operate. Just let me know in the comments with any updates you may come across.
*Please do not rely upon this information as the legality of Uber's operation in each city is subjective to its opponents until an authorized and enforceable ruling has been issued. Many cities are either not enforcing a violation or in the works of creating specific ordinances to address Uber and other ride-sharing services like Lyft.
- ALBUQUERQUE – Illegal (statewide)
- ANCHORAGE – Illegal
- ANN ARBOR – Illegal
- ASHEVILLE, NC
- ATHENS – Illegal
- ATLANTA – Illegal
- AUBURN, AL – Illegal
- AUSTIN – Illegal
- BAKERSFIELD – Illegal (statewide)
- BALTIMORE – Illegal (statewide)
- BATON ROUGE – Illegal
- BOSTON – Illegal
- BURLINGTON – Illegal
- CEDAR RAPIDS
- CENTRAL ATLANTIC COAST, FL
- CHARLESTON, SC – Illegal (statewide)
- CHARLOTTESVILLE, VA
- COLLEGE STATION
- COLUMBIA, MO – Illegal
- COLUMBIA, SC – Illegal (statewide)
- COLUMBUS – Illegal
- CONNECTICUT – Illegal
- CORPUS CHRISTI
- DES MOINES
- EL PASO – Illegal
- EUGENE – Illegal
- FAYETTEVILLE, AR – Illegal
- FAYETTEVILLE, NC
- FLORIDA KEYS
- FORT MYERS-NAPLES
- FRESNO – Illegal (statewide)
- GRAND RAPIDS
- GREATER MARYLAND – Illegal (statewide)
- GREEN BAY
- GREENVILLE, SC – Illegal (statewide)
- HAMPTON ROADS
- HOUSTON – Illegal
- INDIANAPOLIS – Illegal (statewide)
- INLAND EMPIRE
- JACKSONVILLE – Illegal
- KANSAS CITY
- KNOXVILLE – Illegal
- LAS VEGAS – Illegal
- LEXINGTON – Illegal (statewide)
- LITTLE ROCK – Illegal
- LOS ANGELES – Illegal (statewide)
- LOUISVILLE – Illegal (statewide)
- MANCHESTER, NH
- MEMPHIS – Illegal
- MILWAUKEE – Illegal
- MINNEAPOLIS – Illegal
- MODESTO – Illegal (statewide)
- MONTERREY – Illegal (statewide)
- MYRTLE BEACH – Illegal
- NEW JERSEY – Illegal (in parts)
- NEW ORLEANS
- NEW YORK CITY
- OCALA, FL
- OKLAHOMA CITY
- OMAHA – Illegal (Statewide)
- ORANGE COUNTY
- ORLANDO – Illegal
- OXFORD – Illegal
- PALM SPRINGS
- PANAMA CITY, FL
- PENSACOLA, FL
- PHILADELPHIA – Illegal (statewide)
- PHOENIX – Illegal (statewide)
- PIEDMONT TRIAD, NC
- PITTSBURGH – Illegal (statewide)
- PORTLAND – Illegal
- PORTLAND, ME
- RALEIGH-DURHAM – Illegal
- RICHMOND, VA
- SACRAMENTO – Illegal (statewide)
- SALEM – Illegal
- SALT LAKE CITY
- SAN ANTONIO – Illegal
- SAN DIEGO – Illegal (statewide)
- SAN FRANCISCO – Illegal (statewide)
- SAN LUIS OBISPO
- SANTA BARBARA
- SANTA FE
- SOUTH BEND
- ST LOUIS
- TAMPA BAY – Illegal
- TUCSON – Illegal (statewide)
- TUSCALOOSA – Illegal
- VANCOUVER, WA – Illegal
- VENTURA – Illegal (statewide)
- WACO – Illegal
- WASHINGTON D.C. – Illegal Tip-Taking
- WICHITA – Illegal
- WILMINGTON, NC
- WORCESTER – Illegal
Just found this map of illegal cab operations.
Insurance Gap In Case of An Accident
Taxi companies and drivers complain that UberX's unregulated operations leads to insurance protections that are inadequate and unsafe. What most Uber drivers may be unaware is that their insurance may not cover them in the event of an accident because they are operating their car in a "business activity." In fact in some cases, a driver's insurance companies have the right to terminate the policy altogether in such instances. In response to this concern, Uber did make available private insurance and commercial insurance to in the event there is a gap in coverage.
Turning a Blind Eye
This whole model of passing on the risk down to individual drivers forces Uber to somewhat turn a blind eye to the mishaps of its drivers since over training them would get in the way of their contractor classification. This has resulted in multiple lawsuits against Uber.
Every week or so we hear of another incident of a Uber driver who committed some crime or committed some violation of a civil right. Last September, Uber was sued for violating federal civil rights for putting a blind person's service dog in the trunk or in another instance being refused to be picked upon the driver seeing the service dog and twenty-eight similar cases. Just this week, an Uber driver in New Dehli was accused of rape calling for extensive background check for drivers.
Uber probably should not be held responsible for every crime, but the system will breed this type of result. The more drivers they have, the cheaper the fare and the more ready available a ride is to a customer. Therefore, it has become pretty easy to become an Uber driver. There is no interview process or management. Even Uber's background checks they do conduct seems to be flawed.
Unfair Business Practices Against Lyft
This last summer, Uber went on a crazy aggressive effort to recruit drivers from rival rideshare company Lyft. Contractors hired by Uber have been reported to order a Lyft ride and spend their time to recruit the driver to switch to Uber. They have even been accused of making a focused effort to order Lyft rides only to cancel them last minute. Even the phones and credit cards being used by these contractors are said to have been provided by Uber itself. Even though Lyft has a few ways to pursue a claim against Uber, for the most part, they have chosen the public sphere to make their claims.
Tracking Reporters and Driver Privacy
Uber recently had to discipline a New York City manager for tracking the data of a particular reporter. Of course, they only reason we know about this is because the reporter was coming to Uber's office and the manager said to her when she arrived "I was tracking you." Why it is necessary for a general manager to be able to view any driver using the system and their location at any given time seems overly intrusive. This definitely did go over very well after only weeks after did Uber's Senior Vice President Emil Michael apologized after saying they should dig up dirt on journalists that may be critical of Uber.
There is something unfair about Uber's surge pricing. Many would argue is that they are just taking advantage of supply and demand, but the problem is that the market is never that efficient. Uber joins airlines taking advantage of holidays and high demand flights, but there seems to be an expectation and disclosure issue. Surge prices are disclosed yet people seem to still get upset about it. Consumerist.com rightfully asks if it is ever acceptable to charge $362 for a 20-minute Uber ride.
What can I say, I'm not a fan of Uber and I don't plan on riding with them anytime soon.