Move Fast and Break Things – Even the Law

Massachusetts is joining California in suing Uber and Lyft for their misclassification of workers. Could this be the end of the road for the gig economy?

The Massachusetts Attorney General’s office announced this week that they are suing Uber (NYSE: UBER) and Lyft (NASDAQ: LYFT) for the misclassification of workers as independent contractors instead of employees. The declaration was made on Twitter (NYSE: TWTR) with a bizarre video that looked more like a negative ad in a presidential race rather than the initiation of legal proceedings. 

Sombre backing track and fade to black and white aside, the news is a welcome sign that there is some semblance of reckoning for an industry built on the back of exploitation of its workers. The news comes after California’s Attorney General filed a similar lawsuit back in May against the ride-hailing giants. If successful, we could see a drastic change in ride-hailing as we know it. The costs involved in traditional benefits ceded to full-time employees of minimum-wage, health insurance, workers’ comp, and unemployment insurance to name but a few could have devastating effects on Uber and Lyft’s respective paths to profitability. These same costs will most likely be passed on to the consumer, who may be in for a shock when they realize the actual price of a personal chauffeur. 

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I recently wrote a piece about Uber’s acquisition of Postmates where I broke down the inefficiencies of the delivery market. The TL: DR version is that essentially no one comes out the better for it: workers are treated poorly, restaurants suffer, customers pay over the odds, and after all that, the delivery companies are still unprofitable. However, convenience reigns supreme and the industry keeps on trucking with two multi-billion dollar mergers in the past month. Ride-hailing isn’t as ludicrous as the food delivery space, but it’s not far off. Uber’s quest to disrupt personal transportation was successful in many ways if you ignore the fact that it was solely dependent on sidestepping all labour laws. 

Employees usually pull the short straw

The truth of the matter is that while Uber and Lyft’s employee-relations pickle is well documented due to the potential ramifications it can have on their bottom line, the mistreatment of workers is rife across Wall Street, gig economy or not. We saw protests from Amazon’s (NASDAQ: AMZN) warehouse workers back in April due to inadequate safety protections while working in the midst of a global pandemic. Similarly, there is this harrowing report from Electrek on the exposure of Tesla (NASDAQ: TSLA) employees to COVID-19 after restarting production in its Fremont plant. The news would be less damning were it not for Elon Musk’s ignorant and insensitive tweets about the virus a few months ago. 

Other instances of gross mistreatment of employees from some of Wall Street’s darlings include Facebook’s (NASDAQ: FB) content moderation scandal which saw the death of one of its workers at his desk at a site run by Cognizant (NASDAQ: CTSH). Apple (NASDAQ: AAPL) has had a long history of criticism over the conditions of its supply chain, and while it is working hard to rectify this, it found itself in hot water recently over an investigation into the breaking of Chinese labor laws at one of its factories. Walmart (NYSE: WMT), the largest private employer in the United States, has a long and checkered past when it comes to labour rights, while Delta (NYSE: DAL) and United (NASDAQ: UAL) are staring down the barrel of significant job cuts once the deadline dictated by their government bailouts is up. Be aware that this is far from an exhaustive list, I’m just looking at the businesses at the top of mind right now.

While the case against Uber and Lyft is a promising sign for the progression of labour rights, there is endless work to be done when it comes to how employees are treated on Wall Street. At a time when ESG investing is becoming more and more prevalent, accountability for all stakeholders will hopefully be demanded from these companies investors hold so dear.

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.