Canadian HR Reporter
Oct 30, 2017

Uber reflects challenges of gig economy

Taxi Driver
Company considers leaving Quebec
By Marcel Vander Wier

 

 

 

Uber threatened to close up shop in Quebec earlier this month, but does that mean the gig economy as a whole is in jeopardy? Not quite, according to business experts.

After the ride-hailing company indicated it would be ending its service in the province in lieu of a new deal, it eventually backtracked following a provincial government cabinet shuffle that saw André Fortin replace Laurent Lessard as transport minister. Uber hopes to reach a new agreement with Fortin in the coming months, according to the Canadian Press.

Uber’s initial threat came after the provincial government announced updated requirements that would require its drivers in Quebec to undergo 35 hours of training — up from 20 — to bring them in line with the taxi industry. Another requirement would see drivers’ criminal background checks validated by provincial police, rather than third parties.

During a year-long pilot project allowing Uber to operate in Quebec under the previous conditions, Uber drivers were ticketed for not identifying their vehicles, driving cars that were too old, and accepting rides hailed from the street.

Some were also found to have criminal records, Mathieu Gaudreault, spokesperson for the Ministère des Transports du Québec, told Reuters.

Uber employs 50 office workers in Quebec, while more than 10,000 drivers have worked in the province. The company had maintained that the new regulations would stall the company’s business model, in which the majority of drivers work part-time, according to Reuters.

However, Uber’s state of affairs  in Quebec is not indicative of the greater gig economy in the province, said Jeremy Little, an employment lawyer at OLS-Avocats in Montreal.

“From all indicators, the government is asking Uber to comply with the same rules that the government asks taxi drivers to comply with,” he said. “At first blush, it’s difficult to see how it’s unreasonable to ask a company that’s basically engaged in taxi services to meet the same rules that taxis meet.”

“People should not look at the changes this government is making with Uber and think this is a sign that the government is going to crack down on independent contracting everywhere and in every which way.”

Requests for comment on this story from Uber Quebec and the Ministère des Transports du Québec went unreturned.

Legal, political struggles

Quebec isn’t the only place where Uber is facing regulatory and legal setbacks. The company has pulled out of several countries, including Denmark and Hungary earlier this year, as a result.

Last month in London, U.K., Uber was stripped of its licence to operate due to its approach to reporting criminal offences and background checks for drivers. The decision puts 40,000 jobs at risk.

Uber is appealing the decision while also defending its self-employed business model in a separate tribunal. The appeal is expected to take several months, during which time Uber will continue to operate.

In Quebec, politics may be at play in the current predicament, according to Karl Moore, associate professor of strategy and leadership at McGill University in Montreal.

“Quebec is looking at changing the rules, and Uber’s saying that they just can’t operate a business like that,” he said.

“The Quebec government’s view is: We’re the government, we set the rules, you don’t negotiate in the media. Uber does that to some degree. It’s kind of Uber’s very competitive corporate culture… it’s an aggressive corporate culture, partly because at times they’re on the margins, where they’re not illegal, but they’re not legal. They’re kind of in a grey area... (But) I don’t think it will have a chilling effect on the gig economy.”

Alongside its legal losses, Uber has also previously battled government regulations publicly and won — as seen this spring in Austin, Texas, said Moore.

And if Uber truly believes stricter regulations present a significant threat to its business model, it needs to draw a line in the sand in Quebec in defence of its larger markets, he said.

“If they’re seen as giving in too much to government, other governments will be emboldened by that,” said Moore.

“Strategically, you look at it, and from an Uber global viewpoint, you don’t want to be giving in because it’s going to send a bad message to everyone else around the world.”

Meanwhile, Quebec’s government could also be posturing ahead of an election next year, he said.

“Being seen to stand up to a bit of a bully company would be not bad optics for government as well,” said Moore.

Impact on gig economy

Uber’s current struggles should not be viewed as a “bellwether of change” for the way the gig economy operates in Quebec, according to Little.

“Uber is really, in every possible way, a statistical anomaly, a kind of outlier,” he said. “It’s very controversial. It attracts a lot of attention, and it really generates a lot of commentary and action.”

“I don’t think what’s happening with Uber now is any kind of bellwether or indicator for significant changes to how independent contractors operate. I think Uber is a case unto itself and is generally dealt with as a case unto itself… because it brings to the forefront a lot of considerations that don’t exist in a lot of other independent contractor scenarios.”

Essentially, Uber should expect to operate under the same regulations as other companies, said Little.

“I don’t think that people should read too much into these changes,” he said. “I don’t think that any independent contractor should assume that because the government has modified the rules for Uber, (it) means that they’re next.”

While Uber is a very visible member of the gig economy, the company is but a slice of the greater pie, said Colin Busby, associate director of research at the C.D. Howe Institute in Toronto.

“(Uber) provides a very stark, in-your-face example of digital disruption,” he said.

And while regulatory risks will always exist for self-employed contractors and gig workers, Uber’s legal battles are not enough to “deter these entrepreneurial upstarts from getting involved and trying to provide different business models,” said Busby.

Reassuring the tech sector

The fallout from this decision does increase tensions among industries functioning in a similar way to Uber, said Little.

“People are always going to view reality according to their own perceptions,” he said, adding that it will be up to the provincial government to present its regulatory changes to the public with clarity in order to prevent “sectorial panic,” especially within the tech sector.

“If you want someone to have a certain understanding of what you have done, and you don’t want to create a panic, a strategically sound way of going about it is to explain your reasoning… to ensure that it’s clear to the public what will not be affected,” said Little.

“There may be some people who want reassurance, after all this is said and done.”

Montreal is an innovation hub with major players such as Facebook and Google holding offices in the city, said Moore.

“It would be a loss for Quebec to have Uber lose… and it sends a signal that we’re not open to high technology,” he said, noting that regardless of what happens with Uber, a very public message will inevitably be sent indicating that the Quebec government is not a supporter of technology or disruptive innovation.

“That’s not a message you want to share, particularly when you’re trying to compete to get Amazon’s second North American headquarters,” said Moore.

Advice for employers

While Quebec’s regulatory clampdown could serve to benefit more traditional companies and sectors such as the taxi industry, it is not enough to deter the gig economy from making large-scale forays into various markets, said Busby.

“I don’t know how much these kind of innovations can effectively be thwarted or prevented in the longer run.”

Recent history suggests it is necessary for long-established employers to adapt and become more nimble going forward, he said.

“If you’re not going to try to be active in more digital forms of service delivery, then there’s probably a competitor of yours out there that you don’t know about right now that is thinking about encroaching on your existing business lines,” said Busby.

“From a competitiveness perspective, one has to certainly be open to it, although I certainly understand the reluctance, particularly if things have been good for a long time.”

As larger employers get into aspects of the gig economy, it’s a complicated employment relationship, he said.

“It’s a non-standard form of employment relationship that you’re getting involved in with different providers, and that makes things a lot more difficult and complex.”

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