Uber would rather give drivers lots of small benefits than make them real employees

Living that 1099 life.
Living that 1099 life.
Image: AP Photo/Jeff Chiu
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Uber has partnered with Betterment, a startup that manages financial assets with algorithms, to provide easy Individual Retirement Account signups for drivers who want some security during their golden years. The program lets drivers open a Betterment IRA or Roth IRA through the Uber app with no minimum account balance and, for the first year, no fees. It is rolling out to Uber drivers in Seattle, Chicago, New Jersey, and Boston, Uber said today (Aug. 24).

IRAs are the latest in a series of small benefits that Uber is offering drivers as its overall labor practices remain contentious. On Friday (Aug. 18), a US district judge rejected Uber’s proposed $100 million settlement with drivers in California and Massachusetts over whether they should be classified as employees instead of independent contractors. Judge Edward Chen said Uber’s proposal fell short of the $854 million in total potential damages owed, and was not “fundamentally fair, adequate, and reasonable.”

Uber’s other driver friendly moves recently include letting them appeal deactivations (Uber’s term for suspending a driver from the platform), easily pause requests from riders, and get paid instantly through a partnership with Green Dot’s GoBank. Drivers can also earn discounts on Uber rides they might take and get complimentary, ad-free access to streaming radio on Pandora.

Uber is walking a fine and often blurry line in managing its hundreds of thousands of US drivers.  Because Uber considers these drivers independent contractors, it can’t set their schedules, provide training, or do anything else that the courts might deem employer-like. Companies can save as much as 30% on labor costs by hiring workers as contractors instead of employees. Uber says frequently that its drivers like the flexibility they have as contractors, and prefer it to the structured demands of traditional employment.

The company can only offer drivers so many benefits before stepping into the role of traditional employer. It attempts to get around these restrictions with things like its “power driver plus” program, which promises drivers extra cash if they complete a minimum number of trips in a given week.

In May, Uber struck a deal with a prominent labor union to create the Independent Drivers Guild, an association for drivers in New York that helps its members communicate regularly with local Uber managers and appeal deactivations. The new guild does not permit collective bargaining over payment, fares, benefits, and most other hallmarks of a traditional employment arrangement. The company has fought an ordinance passed by Seattle last December that gives drivers in the city the right to collective bargaining.

Meanwhile, Uber drivers who plan to use one of Betterment’s IRAs might want to start saving now. As Bloomberg reported last week, Uber’s autonomous cars will start picking up passengers in Pittsburgh by the end of this month.

In the truly driverless future, Uber won’t need any human drivers at all.