Uber Technologies in 2020: Is the Gig Economy Labor Force Working for Uber?

Author: Armand Gilinsky, Ph.D.

Professor Armand Gilinsky, Jr., Korbel Professor

Publication: Crafting & Executing Strategy: The Quest for Competitive Advantage, 23/e, McGraw-Hill

Publication Date: January 2022

Abstract:
This case covers the company history of Uber Technologies (Uber) from its early beginnings in 2009, through the enactment of California Law AB5 in January 2020. This case highlights Uber’s early successes in expansion in terms of services as well as geographically, as well as the internal and external challenges the company has faced. This case leads to the present issue of legislation aimed to reclassify gig economy workers, like Uber’s drivers, as employees and the impact that has on Uber. In the current stage of legislation, Uber has the option to (1) assume the law pertains to its drivers and make the change to reclassify drivers as employees, (2) ignore the law and carry on with business as usual with the possibility of negative consequences, or (3) choose to hire lawyers to protect the company and fight the legislation.

Uber had many areas to keep an eye on regarding their future operations, but as of late spring 2020, the immediate challenges were the classification and safety of its workers. Many gig economy companies were facing the similar issues, and some had already joined with Uber to fight the pending implementation of the California legislation. After ridership plummeted 80 percent in April 2020 due to the due to the COVID-19 pandemic, on May 4, 2020, Uber announced that it was cutting 3,700 jobs. On May 18, 2020, Uber Technologies Inc. announced in an e-mail to its staff that it was cutting thousands of additional jobs, closing more than three dozen offices, and re-evaluating big bets in areas ranging from freight to self-driving technology as Khosrowshahi attempted to steer the ride-hailing giant through the coronavirus pandemic. Through these moves, Uber planned to save more than $1 billion in fixed costs.

Uber rebuilt its app to make sure drivers and riders adhered to safety guidelines around the novel coronavirus. Before each trip, drivers and passengers now had to agree to a "Go Online Checklist" of items, including wearing a face mask, keeping windows rolled down when possible and have no one sitting in the front seat.“Many countries around the world are moving to a new phase of recovery,” Khosrowshahi was quoted in the popular business press as saying. "We've built a new product experience for a new normal.” On its website, the company pledged 10 million free rides and deliveries of food for frontline healthcare workers, seniors, and people in need around the world. Going forward, Uber’s CEO Dara Khosrowshahi needed to decide how Uber should continue to operate in California, and do so safely, given the unknown ramifications and duration of the COVID-19 pandemic.