Should Uber Drivers and Delivery Riders be considered employees in Bolivia?
Shared Economy Business Models are companies such as Uber, PedidosYa, AirBNB, Yaigo, etc, that are gaining lots of popularity recently throughout the world, and Bolivia hasn’t been the exception. Currently, many taxi companies in Bolivia have been severely affected by the increase of users on the Uber platform, is estimated that they have reduced their revenue by a 50%, at the same time that in 2018 around 72,000 users from SCZ reported using Uber at least 1 time over the last trimester of the year (Veliz Rafael, 2/8/2018, EL DEBER, https://bit.ly/3mUPsTb). Hotels in places such as Samaipata, Lago Titicaca, Salar de Uyuni, etc, are experiencing a decrease in revenue as Airbnb hosts lower prices, according to the app you can find a comfortable room for a couple in Samaipata at around 100 bs through Airbnb, in contrast, to get the same conditions in a hotel, the price would be around 150 bs approx. Traditional Delivery companies are disappearing at the same time that PedidosYa and Yaigo associate with more local businesses, according to several studies, the demand for this kind of services through online platforms increased by 300% over 2020 and reached even to 5000 orders per day (Aguirre Liliana, 25/6/2020, LA RAZON, https://bit.ly/3vaLJVx). Shared economy business models are really affecting our society and the way that we consume, since they have no direct customers, they just connect Providers with Consumers, and charge a small fee for that, consequently allowing individuals to rent or borrow goods rather than buy and own them, and very often at a much lower price, for example, Uber is 25% much cheaper than a taxi 7 times out of 10, not mentioning that in the majority of the cases these Platforms offer a much faster, reliable and better quality service.
However, as these big tech companies expand all over Bolivia, there has been a big question rounding over all of this success, and is, What about the “workers”? In this type of business model, workers such as Uber Drivers or PedidosYa riders are called Prosumers, because to the company they represent a consumer but for the community a provider, therefore its name. In actuality, there is no labor legislation for prosumers of these big corporations, hence they do not receive any kind of legal labor benefit in the Bolivian Society, since they are classified as independent contractors, however, is this really the case? Most of the prosumers in Bolivia just dedicate themselves to these platforms, consequently is its main income, also, they cannot decide the pricing of the service, neither be able to control directly the relationship with the customer, for example in Uber, everything is done through the platform and there is no further decision taken from the driver than rather just accepting or declining the travel. Prosumers can also be rejected from applying to these platforms, and if they get accepted they could be banned as well. On the other hand, they can work whenever they want, and accept or decline each task, they work with their own equipment or materials, and also they can work in several platforms at the same time, for example, a Delivery Rider can work through PedidosYa and Yaigo in the same night, in that sense, they are much freer than an employee. Nevertheless, is that enough to be considered as an independent contractor? That is what we will analyze in this essay in order to achieve a fair response to this dilemma of whether prosumers should or shouldn't be considered as employees of these big corporations.
Let’s start first by analyzing and differentiating these 2 concepts, for that matter we are going to know exactly what does it means to be an independent contractor. An independent contractor is an individual who provides goods or services according to the terms of a contract they have negotiated with an employer. Independent contractors are not employees, and therefore they are not covered under most governmental employment statutes, nor receive any kind of worker’s compensation benefits, plus, an employer does not have to pay employment taxes for an independent contractor. An independent contractor accomplishes the following requirements:
Its paid by the project instead of receiving an hourly, weekly, or monthly wage
It provides its own tools, equipment, or materials
It’s free to perform services or work for other clients
It’s free to work off-site and is not required to work during established hours
It’s free to subcontract out some of the work to others
It's free to complete the project at its own discretion and it's not given specific instructions by the employer.
Therefore, as you can see it's more convenient for companies to have independent contractors rather than employees, and that is the reason why there have been so many cases of companies that classify their workers as independent contractors when that is not really the case, could shared-economy businesses be one of those cases?
One of the main aspects of the topic is pricing, and we will use the case study of Uber in order to clarify this. Uber is the main and most known shared-economy business platform in Bolivia, and since its entry into the market, lots of people have registered in the app in order to become “Partner-Drivers”, earning approximately 3880 BS/Month, however, even tho people think that Uber Drivers earn in the same way that Taxi Drivers do, this is not really the case, the amount earned by Uber Drivers is basically deducted by Uber in all senses because the real payment that the driver receives is based on the following formula: Base Fare (deducted by uber) + Fee of Distance and Time of the trip (deducted by Uber), the base fare could be variable depending on the zone, and the second factor is fixed. In other words, Uber pays the Drivers Indirectly based on an algorithm that it itself has created, and surely you will know that, for example, a trip by Uber in Santa Cruz, from Equipetrol to the Center of the city costs in average much more than a same-distance trip from another part of the city that it’s not so concurrent, this is called Surge Pricing. Consequently, many drivers that work in not busy areas earn much less than what they should because the base fare is reduced considerably. Therefore, this is a characteristic of Employees, since Uber is indirectly paying drivers based on its own criteria, and drivers cannot do any action in order to negotiate these prices, basically, they are fixed by the platform, and this is definitely not a quality of independent contractors.
On the other hand, Uber drivers are free to choose if they want to accept the pricing given by the app, they are not forced at any moment to take any ride they would not like to take, in that sense they are much more free compared to a Taxi Driver from a formal company, who cannot decline any of the rides that the central station gives them, big difference right?
Another affair to take into count is the several penalizations that Uber can give to the drivers if they don’t fit in certain criteria that the platform has defined for all the drivers in general, for example, if a Driver rejects too many rides it can be penalized by Uber, firstly by putting him into a “Time Out” in which the driver cannot accept any rides depending on the time that Uber has defined, the more times the driver rejects a ride the more time he will be at “Time Out”, however, if the driver has a high cancellation rate it can be deactivated by Uber, meaning that he could never work again at the platform. Following this premise, where is the freedom here? Drivers are basically threatened when working at the app, they don’t really have much choice in accepting or declining each ride, not to mention that they can also be penalized if they have a low rating, once a driver reaches a rating of 3 stars, then Uber opens a case and might kick out the driver forever, exactly as an employee, this goes totally against the last premise that we defined for “Independent Contractors”, and leads us to the next point.
As you know, Independent Contractors are “free to complete the project at its own discretion…” however, when a driver accepts a ride is basically controlled by Uber since the beginning, if he takes a different route Uber will enter into a protocol of being alert and warn the driver to follow the predetermined path, therefore, giving instructions to the driver of how to accomplish the task, which unquestionably goes against the principles of Independent contractors, finally, drivers are also controlled by the rating that the customer gives at the end of the trip, which as you know can be used by Uber to exert control over the motorists.
Lastly, there are 2 specific points to highlight about the issue, the first one is the actual contract between the 2 parts. Once a new driver wants to enter into the platform he must sign the contract terms, which are not negotiated, and the driver must present all the requirements needed, for example, the car must be a maximum of 5 years old from the actual year, the car must have certain comfort conditions, the car must always have maintenance after a predetermined period, you must show your curriculum, etc. In other words, there is not much difference between applying for a formal job or applying for an Uber driver, and the same happens with PedidosYa or Yaigo. The second point is the fact that prosumers can't construct a client base, for example, an Uber driver does not have any relationship with the actual passenger, since everything is managed by the platform, therefore drivers are subordinated and dependent on Uber almost to a 100% when doing their job because once they log out from the app they basically have 0 customers and cannot provide their service anymore, this doesn’t seem to be something that will happen to an independent contractor.
In conclusion, prosumers are definitely not independent contractors, mainly because these platforms have considerable control over them, and pricing is also set up by these companies without negotiation. However, we cannot either call them employees since prosumers are much freer in so many ways, they don’t have a work timetable, they can accept or decline each task, and also they can use their own materials in order to provide the service. Consequently, prosumers seem to be in some kind of midpoint between these 2 different concepts, and in order to achieve a fair response to the dilemma if they should or shouldn’t be considered employees, we must agree that they should have some basic labor rights, surely not as formal employees but options such as a Pension scheme, holiday pay or a minimum hourly wage, should be considered. The most suitable one for Bolivia would be the minimum wage, this concept is already being applied in the UK (Uber drivers to get workers' rights in the UK, Deutsche Welle, Germany, https://bit.ly/3nUh4IV), and basically consist of Drivers being paid the national minimum hourly wage, which in Bolivia would be around BS.11,3, this will only be applicable if the Driver is working during this hour and if the money that he generates is lower than this amount. Hence, prosumers would not be earning less than the minimum wage and they will still be able to keep their freedom concerning the other aspects. On the other hand, if shared economy platforms consider prosumers as formal employees, then it will be a drastic mistake since costs would be extremely high and temporarily they will run out of business, which would affect a bigger mass of people, leaving tens of thousands of families without income and other hundreds of thousands without delivery or transportation to perform their daily activities. Accordingly, this topic should be managed with extreme caution and decisions should be made very carefully since we are talking about a giant mass of people that are currently involved in these kinds of services.