Insights + Resources

12 December, 2018

Regulating the gig economy and DDIs: snapshot studies of Uber and Airbnb

Airbnb and Uber are two of the largest companies in the sharing economy, growing larger than conventional competitors in their respective sectors. Regulating DDIs is a difficult task. Below we look at how regulators around the world deal with some of the stickiest issues associated with the world’s biggest unicorns.

Definitions

gig economy (noun) ~ labour market characterised by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.  

DDI (noun) ~ Digital Disruptive Intermediaries. Dual-sided network business that disrupts an incumbent market by providing an exchange platform that digitally connects casual or non-professional suppliers with customers, often undercutting incumbent competitors.

Introduction

As a companion to our article about regulatory challenges posed around the globe with respect to the gig economy and regulating DDIs, below we take a snap shot look at the employee status of Uber drivers and how Airbnb is regulated by Councils in Sydney and New York.

Make sure to check out our analysis on the general issues associated with regulating DDIs.

Snap shot 1: Are Uber drivers employees or contractors?

Whilst Uber prefers to characterise itself as a digital booking service/marketplace that connects customers with independent “partner drivers”, whether this is legally correct is being increasingly questioned.

 Indications that Uber drivers are contractors include the fact that drivers:

  • Maintain ‘control’ over the hours and frequency of their work;
  • Bring their own ‘tool’ in the form of a car;
  • Are not required to wear a uniform or display any Uber signage;
  • Are paid per trip, and not as a flat wage;
  • Deal directly with the ATO on their own behalf; and
  • Do not accrue any personal or annual leave, and no super contributions are made by Uber.

However, factors that have been argued to indicate an employee relationship include:

  • Uber drivers do not have much choice in how they complete their work, the parameters of the work (such as directions to take) are set by Uber through the driver App;
  • The drivers do not play a significant role in determining their rates of remuneration; and
  • As a whole the drivers’ work is an integrated and crucial part of Uber’s (as opposed to a one-off task that is outsourced);

Courts in Australia, the UK and the US have all treated the factors listed above differently in characterising the relationship.

Australia (~80k Uber drivers)

These arguments were tested in a case[1] brought by an ex-Uber driver before the Fair Work Commission (‘FWC’). Balancing the above arguments, the FWC ultimately found the factors indicative of a contractor relationship outweighed those suggesting a relationship of employment.

UK (~40k Uber drivers, with 75% in London)

In the UK the Employment Appeal Tribunal (‘EAT’) did not accept Uber’s characterisation of itself as a marketplace, and has upheld a decision that found partner drivers were in fact employees of Uber. [2]

The EAT specifically focused on looked to how the work was carried out once a driver accepted a trip, noting that from this moment the drivers became bound, subject to the cancellation policy, to perform work that was crucial for the operation of Uber’s business model. The EAT also recognised that during this period, drivers had effectively no control over how the work was to be performed (this was expected to be done according to Uber’s algorithmic mapping and service standards) and could not negotiate their rates of remuneration, either with the platform or with passengers.

In late 2017 Uber’s application to leapfrog the Court of Appeals and have its’ case heard in the Supreme Court was rejected, and at the time of writing it is understood the Court will hear the appeal on 31 October – 1 November 2018.

US (no clear data, roughly 600k – 1.3m Uber drivers)

Different jurisdictions within the US have also come to varied conclusions regarding relationship between Uber and its’ drivers. Some of the most notable decisions include those of:

  • The Californian Labour Commission, which held in 2015 that Uber drivers were indeed employees who were entitled to reimbursement for costs incurred in the course of their employment;
  • Miami-Dade’s Third District Court of Appeal, which in January 2017 found a driver was not an employee of Uber given he was not obligated to accept trips, nor was he subject to any forms of control with respect to his conduct, dress or other employee functions; and
  • The New York Department of Labour, which in June 2017 found driver should be considered employees because Uber exerted a sufficient degree of control and supervision over the drivers that would not be present in a typical contractor relationship.

Snap shot 2: How is Airbnb regulated in Sydney compared to New York?

Sydney

Sydney is the fourth most popular destination for Airbnb globally (with over 24,000 listings in mid 2017), but there is no uniform way of regulating hosts’ properties across the city.

In NSW, local councils regulate short-term rentals through their independent zoning laws or their Local Environmental Plan. These may differ drastically and thus it is possible for a home owner to face fines and legal action for the same conduct that is permitted in the suburb.

Moreover, breaches of relevant zoning laws can be reported by unaffected third parties (even though standard legal actions generally cannot), meaning short-term rental hosts are generally more exposed than they would be otherwise under the law.

New York City

In October 2016 the New York State Multiple Dwelling Law made it illegal to advertise or rent out  out entire apartments for less than 30 days in New York City (‘NYC’). These restrictions do not apply if the host is present and there are only one or two guests.

In April of 2017, mayor Bill de Blasio allocated US$2.9 million of funding for the Mayor’s Office of Special Enforcement (‘OSE’) to enforce these laws.

Unlike the laws that apply in Sydney, the regulations in NYC are intended as a way of addressing “bad actor” landlords who reduce the amount of personal housing available on the already under-serviced housing market.

[1] Kaseris v Rasier Pacific V.O.F [2017] FWC 6610

[2] Uber B.V. and Others v Mr Y Aslam and Others: UKEAT/0056/17/DA

The information above is general in nature. Please contact us if you would like advice on disruptive businesses under Australian law.