A Bumpy Ride: Uber’s Dilemmas

By Lindsey Li
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Lindsey Li is a freshman at the University of Pennsylvania and an associate editor of the Penn Undergraduate Law Journal.

Virtually unknown five years ago, Uber has quickly become the world’s largest ride-sharing business model company. [1] Though currently expanding at a rate faster than that of Facebook in its sixth year as a private company, Uber is facing several legal issues that may ultimately prevent it from dominating the transportation industry.

The first dilemma Uber faces is misidentification and allegedly inaccurate background checks. Highly criticized for its negligent background check policies, Uber has been accused of hiring “registered sex offenders, identity thieves, burglars, a kidnapper, and a convicted murderer.” Additionally, Uber has had a history of criminals posing as Uber drivers; one recent example is that of an anonymous undergraduate at Simmons College who was approached by a “dark vehicle...the man behind the wheel said he was an Uber driver, and told the student to get in.” [2] This is especially problematic for students who attend universities in large cities and may rely on Uber as their main form of transportation between their campuses and the rest of the city. Social consequences such as kidnapping and exploitation arising from these scenarios also leave the culpability factor unclear—would Uber bear the blame for these crimes?  

Critics of the ride-sharing service declare that Uber’s background check system isn’t thorough enough and fails to flag criminal convictions dating more than seven years prior to drivers’ registration with the company. [3] Instead, they suggest LiveScan, the system commonly used by city cab services, as an alternative method for performing background checks. LiveScan is a program that uses “biometric identifiers, like a fingerprint” to help track aliases in an individual’s criminal record. [4] With such a long list of incidents detailing all the horrific lapses in passenger safety since Uber’s emergence into domestic and international markets, it seems strange that the transportation powerhouse has yet to update its policies.

This leads into the second issue that the company must address: the classification of Uber drivers as contractors rather than employees. If Uber updates its policies to encompass deeper background checks such as fingerprinting into the hiring process, “drivers seeking classification as employees could try to use the move as evidence they are indeed employees and not private contractors,” according to Tess Townsend of Inc. Magazine. [5] Without the quick turnover rate associated with the label of contractor, Uber would be forced to provide its drivers with more benefits, as is being demanded in a class-action lawsuit against the company in California. There, “three drivers who claim they are Uber employees, not contractors, [believe they] deserve health benefits and other expenses normally covered by an employer.” [6]

Though it may seem counterintuitive based on its current $51 billion market valuation, Uber cannot actually afford to pay for health insurance, workers’ compensation and work expenses, as the company still operates significantly on money from investors. [6] Additionally, the valuation is contingent on drivers being classified as “1099” workers rather than (W-2) employees, something that allows Uber to “avoid the taxes and insurance and other administrative expenses that companies usually have to pay a workforce.” If Uber were to re-classify their drivers as employees—a change that would require a complete overhaul of their current business model—it would cost them an estimated $4.1 billion. [7]

Ultimately, understanding the sharing economy and Uber’s business structure’s place in it is just the first step in understanding our roles as passengers or drivers. So whether you believe in the ever-advancing self-run and technologically dominated transportation market or prefer your vehicle to be a traditional yellow, get ready to do a whole lot of sharing in the future.


[1] Reynolds, Molly. “Why Every Business Model May Soon Look Like Uber’s.” INC. March 5, 2014. Accessed September 14, 2015. http://www.inc.com/molly-reynolds/is-our-future-heading-toward-the-uber-business-model.html
[2] Parker, Ben. “Simmons College Students Warned About Fake Uber Drivers After Incident.” CBS Boston. September 14, 2015. Accessed September 14, 2015.
[3] Rosenblatt, Joel. “Uber Driver Screening Missed Ex-Convicts, Prosecutors Say.” BloombergBusiness. August 19, 2015. Accessed September 14, 2015. http://www.bloomberg.com/news/articles/2015-08-19/uber-failed-to-screen-out-criminals-as-drivers-prosecutors-say
[4] Reynolds-Caballero, Andrew. “Uber Missed Criminal Record of Drivers, Prosecutors Assert.” The New York Times. August 19, 2015. Accessed September 14, 2015. http://www.nytimes.com/2015/08/20/technology/uber-missed-criminal-records-of-drivers-prosecutors-assert.html?_r=
[5] Townsend, Tess. “Why Uber Doesn’t Want to Fingerprint Drivers.” INC. August 20, 2015. Accessed September 15, 2015. http://www.inc.com/tess-townsend/uber-rethink-backgrounds.html
[6] Macmillan, Douglas. “Uber Appeals Class-Action Ruling for Lawsuit.” The Wall Street Journal. September 15, 2015. Accessed September 17, 2015. http://www.wsj.com/articles/uber-appeals-class-action-ruling-for-drivers-suit-1442362190
[7] Gandel, Stephen. “Uber-nomics: Here’s What It Would Cost Uber to Pay Its Drivers as Employees.” Fortune. September 17, 2015. Accessed September 17, 2015. http://fortune.com/2015/09/17/ubernomics/

Photo Credit: Flickr User b k

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