Profits Uber everything

A societally important question is how on-demand, sharing economy companies, such as Uber, are labeled and classified as businesses. New research of Associate Professor Magdalena Cholakova and Professor Joep Cornelissen at Rotterdam School of Management Erasmus University (RSM) shows that the category that Uber wants itself to be classified in, is morally and legally questionable. The study focuses in particular on Uber’s efforts to categorize workers as ‘independent’, rather than ‘employed’, and discusses the implications of this for the nature of employment relationships in this kind of on-demand business model.

How business-related activities are categorized has far-reaching consequences for regulation, social equality and prosperity. That’s why these kinds of categorization issues should be considered more carefully from the political and moral side as well, according to the researchers. The veneer of corporate rhetoric or legal jargon often seems to cast instances of categorization as a natural and automatic affair that appears to be value-free. As a recent ruling in New Jersey, in which Uber was fined US$649 million for not addressing its drivers as ‘employees’ shows, understanding the moral dynamics of category work is timely and pressing.

By elaborating the intrinsically moral nature of such instances of categorization, the researchers call upon social scientists to cast and study business-related categories in such terms instead. While there is some limited categories-related research on the moral aspects of product and market categories, the categorization battles that are raging over employment rights and other high-stakes issues in the economy ask for a much more vigorous and morally charged approach towards understanding business-related categories.

Uber and its strive for a new category of workers

In their research, Cholakova and Cornelissen show that Uber is strategically striving to establish a new category of ’independent worker’ to exonerate themselves of any direct responsibility for their employees in terms of social security, protections and reasonable pay. This newly proposed category has significant economic and societal consequences.

The question that this raises is whether we, as a society, should accept a company’s claim to be incorporated as a platform, to simply act as an intermediary between customer requests and work demands through an app, and thus be allowed to comply with far fewer corporate or employment laws and have no liability whatsoever when things go wrong?

But what is clear, is that the arguments Uber is using to justify this require further examination. For example, some of the supporters of granting Uber’s drivers a status of independent workers (rather than employees) argue that one of the reasons is the immeasurability of work hours (Harris & Krueger, 2015). Similarly, it is argued that workers can have multiple apps running simultaneously, making it hard to attribute hours to a single employer. But Cholakova and Cornelissen argue otherwise, given that Uber actively controls its drivers, even during ‘idle’ time as they are expected to accept a ride within 15 seconds, without knowing the exact location or fee that they will earn from it. Also, as failure to accept rides poses the risk of being let go, the real freedom of the drivers is put into question.

Dr Magdalena Cholakova: “We consider the reasoning in support of a new category of ‘independent worker’ logically flawed and dishonest and expect a negative net effect for society. The new proposed category undermines the post-war established ideal of an employment relationship with support and protections being provided to workers. In fact, we believe that if this new category becomes institutionalized in jurisdictions around the world, it will not only directly harm individual workers, but instigate across the labour market a new precariat class of workers who have no job security, poor pay, and whose material and psychological welfare is seriously compromised.”

More societal attention for the impact of gig companies

The researchers advocate that more attention and scrutiny should be paid to gig companies’ active engagement in politically motivated category work through their lobbying, advertising and legal submissions. Gig economy companies already operate as if their employees are ‘independent workers’. These companies also ensure that their language is consistent with this category of employment and appear to suggest that it is very much already an institutionalized fixture. Companies such as Deliveroo and Foodora, for example, meticulously scrutinize any elements of their description that may ‘mistakenly’ have them categorized as traditional food-delivery employers.

And while these classic gig economy companies embrace the lingo, other companies that traditionally classified their personnel as employees are now also joining the movement and switching to the ‘independent worker’ label to reap the same kind of crass economic benefits (c.f., Marks, 2018; Fleming, 2017).

Prof. Joep Cornelissen: “These broader developments in the economy should be more than enough encouragement for everyone, including policy makers, legislators and researchers, to become involved in defining the appropriate organisational and employment categories for Uber and other sharing economy companies. We feel that is needed to ensure that profits do not go to Uber over and beyond everything else”.

Read the article J.P. Cornelissen & M.N. Cholakova (2020), Profits Uber everything? The gig economy and the morality of category work in Strategic Organization.

More information

For more information about RSM or this article, please contact Irene Bosman, Media Officer for RSM, on +31 10 408 2028 or by email at bosman@rsm.nl.