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Uber CEO proposes flexible 'benefits funds' for drivers without making them employees

Uber CEO proposes flexible 'benefits funds' for drivers without making them employees
© PHILIP PACHECO/AFP via Getty Images

Uber CEO Dara Khosrowshahi is calling for a set of new laws providing more benefits for independent contractors without designating them as employees. 

In a New York Times op-ed published Monday, the head of the ride-hailing service called the current employment system "outdated and unfair" and acknowledged that the gig economy doesn't offer enough protections for its workers. 

"Many of our critics ... believe that Uber and our gig economy peers have failed drivers by treating them as contractors, and that we will do anything to avoid the cost of employee benefits like health insurance," Khosrowshahi wrote. "Given our company’s history, I can understand why they think that. But it’s not true, and it’s not what I believe."

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Khosrowshahi claimed that the employment system in the U.S. offers a "false choice" that makes workers pick between independent work that offers more flexibility and little benefits or full-time employment that offers little flexibility and basic protections. 

"There has to be a 'third way' for gig workers," Khosrowshahi said, proposing laws requiring gig economy companies to establish "benefits funds" that offer cash to workers for benefits including health insurance or paid time off. 

Had such a requirement been the law in every U.S. state, Uber would have have contributed $655 million to the fund in 2019 alone, Khosrowshahi noted. 

He added that states should be mandated to provide medical and disability coverage for injuries incurred on the job. He also noted that Uber would be more transparent about how much drivers earn and create more procedures to handle contractors' concerns. 

Uber and other gig economy companies have come under growing scrutiny in recent years over employee classifications. Attorneys general in Massachusetts and California filed separate lawsuits against Uber and Lyft, a rival ride-hailing service, earlier this year, alleging that their independent contractor designations were illegal.

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California Attorney General Xavier BecerraXavier BecerraCalifornia Republicans agree not to use unofficial ballot drop boxes Schwarzenegger: California GOP has gone 'off the rails' with unofficial ballot boxes California GOP won't comply with order on unofficial ballot drop boxes MORE (D) cited the coronavirus when filing a lawsuit against the companies in May, claiming their policies were harming Americans. The complaint came as part of California lawmakers' attempts to enforce Assembly Bill 5, a new state law that classifies gig economy workers as employees. 

Uber has claimed that a majority of its drivers do not want to be full-time employees because of the flexibility they are offered as contractors. However, Khosrowshahi admitted that the current system offers a "serious drawback" in the event of an emergency. 

"During this moment of crisis, I fundamentally believe platforms like Uber can fuel an economic recovery by quickly giving people flexible work to get back on their feet," Khosrowshahi said. "But this opportunity will be lost if we ignore the obvious lessons of the pandemic and fail to ensure independent workers have a stronger safety net. This is the time for Uber to come together with government to raise the standard of work for all."

The comments from Khosrowshahi come as Uber experiences a marked decline in demand around the world because of the coronavirus pandemic. The company last week reported a 30 percent year-over-year drop in revenue in the second quarter of 2020, its steepest decline since going public in May 2019.