Uber shares fall after company discloses first costs in reclassifying UK drivers, while US administration promises review of contractor issue
Uber’s shares slid late last week after the company for the first time gave investors a concrete idea of the potential cost of classifying some of its worldwide workforce as employees.
In delivering its earnings for the quarter ended 31 March, Uber included $600 million (£432m) accrual for costs it expects to bear in settling wage claims resulting from a UK Supreme Court ruling in March that forced it to class its drivers as employees.
Uber said in March it may have to pay claims of back pay due from British drivers, including holiday pay, wages equal to the minimum and potential pension contributions.
The figure was far higher than the $200m Uber and other companies spent to pass California’s Proposition 22 last year, which exempted them from classifying their contractors as staff.
In addition, President Joe Biden’s new secretary of the Labour Department, Marty Walsh, said late in April that drivers should receive employment benefits in most cases.
Walsh followed up his remarks last week with the withdrawal of the Independent Contractor Rule, brought in by the previous administration to make it easier for companies to classify their workers as contractors.
“By withdrawing the Independent Contractor Rule, we will help preserve essential worker rights and stop the erosion of worker protections that would have occurred had the rule gone into effect,” Walsh said in a statement.
“Too often, workers lose important wage and related protections when employers misclassify them as independent contractors,” he added.
The moves apparently weighed on investors’ minds, with shares in both Uber and rival Lyft dropping sharply from Wednesday to the end of the week.
Uber sought to reassure investors, with chief legal officer Tony West, who worked in the Justice Department under President Barack Obama, saying he saw room for “meaningful dialogue” with the current administration.
But industry watchers said the issue would is unlikely to go away anytime soon, with analysts Truist saying in a research note that labour model concerns were “likely to weigh down the stock in the near/medium terms”.
Nevertheless, Uber’s financial performance indicated it is poised to emerge relatively intact from the pandemic.
The company said it is on track to achieve its first-ever quarter of profitability, on an adjusted EBITDA basis, by the end of the year.
Uber’s net loss for the quarter was $108m, far less than the $968m for its fourth quarter 2020, due largely to a $1.6bn gain from the sale of its self-driving unit, ATG.
The company’s operating loss was still high at more than $1.5bn for the quarter.
Lyft followed Uber in selling off its self-driving unit to Toyota in April.