Don't Leave Uber to the Courts

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(Bloomberg View) -- A London tribunal's ruling last week that Uber drivers aren't self-employed was hailed as a victory by the company's critics. The court upheld an earlier finding that Uber resorted to "fictions" and "twisted language" in denying its obligations as an employer, and that its claim to be a service linking 30,000 small businesses to their customers was "faintly ridiculous."

Clear as that might seem, the judgment doesn't settle the matter. The legal fight will continue in the U.K., as in many other jurisdictions, with no end in sight. This is what happens when courts are asked to apply outdated laws to a rapidly changing labor market.

A San Francisco judge presiding over a similar case put it well: The jury, he said, is being "handed a square peg and asked to choose between two round holes."

The crucial question is for lawmakers to resolve. Uber's drivers aren't employees in the old-fashioned sense -- and they aren't independent contractors in the old-fashioned sense either. This is a new kind of employment relationship. It needs to be recognized, and regulated, accordingly. 

The U.K. government, in fact, is open to the idea. Earlier this year, the Taylor review proposed a new employment status of "dependent contractor," a category that Canada and some other jurisdictions already have. The report said the absence of a requirement to perform work -- a standard feature of the gig-economy model -- shouldn't automatically exclude employment rights. At the same time, though, the dependent contractor's looser relationship with the platform provider suggests a more limited set of obligations. According to circumstances, these might include sick pay and paid time off, and in some cases the statutory minimum wage.   

What dependent-contractor status means, and the rights it would confer, still needs to be worked out, so the idea won't bring disagreement on the subject to an end. But it puts the main points of contention in the right place -- in the realm of politics not litigation.

Uber's characteristic method of barging into markets and deeming itself exempt from the existing rules has made it many enemies. Yet it can hardly be considered a failure -- certainly not from the customer's point of view. Its ferocious innovation, and that of other platform enterprises, has left employment law behind. The rules need to catch up, preferably in ways that don't squelch the benefits. That's a job for lawmakers not judges.

--Editors: Therese Raphael, Clive Crook

For more columns from Bloomberg View, visit http://www.bloomberg.com/view.

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