Uber’s Proposal for Portable Benefits Is a Poison Pill

Uber has finally found a jurisdiction in Canada that will allow it to create a new legal category for its workforce. To sweeten the deal, it's offering a meager portable benefits system — but the actual benefits will all accrue to Uber.

An Uber Eats worker delivers food in Toronto, Ontario. (Steve Russell / Toronto Star via Getty Images)

In recent years, Uber’s business model, which relies on a precarious and ambiguously classified workforce, has been under threat by labor organizations and progressive governments seeking to combat the ills of the gig economy. The company has lost a good number of legal challenges brought by drivers. More jurisdictions are now contemplating laws like California’s AB5 that seek to clarify the status of the platform’s drivers as employees.

After over a decade of running at a loss, the ride-sharing app saw its first profitable quarter in winter last year. The sustained increase in the value of the company’s share price has, however, kept investors interested. In an industry in which tight profit margins are the norm, benefits and guarantees of basic, minimum standards of work pose a challenge to Uber.

Anticipating more legal challenges, Uber has studied the legislative defense playbook and come up with a plan. Rather than get litigated or legislated into an employer-employee relationship, it now seeks allies in government and the labor movement to help it redefine its drivers as a new type of worker. This worker hovers in a strange state of indeterminacy — not quite an independent contractor but also most definitely not an employee.

As a sweetener, it is encouraging the creation of pooled benefit programs for its drivers and all competitor platform employers. In exchange, Uber seeks employment law reforms that prevent drivers from becoming employees. The firm calls this model “Flexible Work+,” but in fact it is little more than an attempt to hollow out employment rights.

Precarious workers, by definition, do not have access to benefits through their employer or workplace. Consequently, the struggle for benefits is of utmost concern for these workers; it is therefore unsurprising that labor organizations have put these struggles in the forefront.

Any organizer will tell you workers join campaigns that seek to grant them benefits. Uber, recognizing this fact, is offering its workers table scraps, hoping that by doing so they will be able to quell demands for fair remuneration.

What Are Portable Benefits?

Uber has taken this sales pitch on the road across North America and has recently found a receptive legislator in the Ontario government. Premier Doug Ford and his party appear willing to do Uber’s bidding and legislate a whole new category of worker under Ontario’s employment laws. Early signs suggest that the new category will be a catchall for the province’s platform employers and employees, significantly diminishing minimum employment standards. At the same time, the Ford government also appears poised to facilitate a group benefits plan for Uber and all other platform workers. Earlier this month, the province’s labor minister announced the creation of an “advisory panel” to research options for delivering these benefits.

In the abstract, a sectoral or portable benefits program for precarious workers is a good idea. So good, in fact, that many Canadian workers already participate in such programs. They exist, for example, in the construction industry, where building trades unions have bargained union-administered multiemployer pension and benefit plans designed to follow workers from employer to employer.

Thanks to significant negotiated employer contributions made on workers’ behalf during periods of employment, these benefits also protect workers through the periods of cyclical unemployment that are a characteristic feature of work in the construction industry. Crucially, it was significant union bargaining power, combined with strong underlying legislative supports for broader-based bargaining, that made these benefits possible.

The same underlying conditions are not present in today’s platform-based gig economy. Consequently, we should not expect a scheme established at the behest of Uber to mirror the generous multiemployer benefits achieved in the unionized construction industry.

More generally, Canada has national programs that support worker’s access to certain benefits. Pressure is increasingly being applied to platform employers to participate in the various provincial workplace safety and insurance schemes. The federal government has suggested it will find ways to ensure that gig workers can access the national unemployment insurance scheme available to employees (called Employment Insurance), and national compulsory pension scheme available to employees and the self-employed (the Canada Pension Plan). Details on this proposed change are scant, so we cannot yet say whether they will turn out to be a disappointment.

The point is this: a portable benefits program isn’t a new idea, and it certainly isn’t an idea that requires or justifies the permanent misclassification of drivers and deliverers as second-class employees. If Uber really wanted to deliver benefits to its employees, it could set up portable benefits right now. It could even try to coordinate its program with other platform employers in the sector if it wished. And if it really cared about its workers’ interests, it could support a broader-based bargaining structure that would enable them to engage in meaningful collective bargaining.

But that isn’t Uber’s objective. Uber’s objective is to legislate changes to employment laws that deprive its drivers of minimum employment standards protections. Key for Uber is ensuring the entire sector of gig workers does not have equal employee rights.

A sectoral solution to precarious work is the right one. The labor movement, governments, and academics who study precarious work have suggested different approaches to the problem posed by platform employers. However, they all have in common the objective of ensuring precarious workers are treated as employees, with access to standard protections and the right to engage in collective bargaining. Uber, meanwhile, has no desire to improve gig workers’ terms of employment — it would prefer to legislate them into second-class workers.

This makes the recent announcement of a deal between Uber and a Canadian union to “represent” Uber drivers all the more confusing. The details are still not available, but knowledgeable commentators have outlined its challenges. Whether or not the deal itself works out, it represents a significant political win for Uber and other platform employers. Future lobbying efforts will have a precedent at hand to point to as an example of union support for a “third category” employment status.

However, the baby should not be thrown out with the bathwater. Resistance to the permanent entrenchment of gig workers as second-class workers is entirely justified, but this should not preclude an assessment of the portable benefits proposal itself.

Crunching the Numbers

Flexible Work+ is very difficult to properly evaluate because details of the program are so scarce. What we do know is that it has all the hallmarks of low-value individual account schemes. Its basic mechanism is to require contributions to a centralized fund by each worker, with a contribution by all eligible platform employers.

When hours worked or contributions made reach a certain threshold, a worker becomes eligible to receive benefits. Workers can direct the credit in their accounts toward different benefit options, such as dental or vision benefits, an individual retirement savings account, life insurance, or other benefits.

However, there is no “defined benefit” promised to workers in this scheme, there are only forced savings. Workers can decide on how these savings are allocated by choosing what benefits they wish to channel their funds into. The “flexibility” of the program is, presumably, the privilege that workers enjoy to make this choice. And yet everything depends on the level of contributions, the price of the benefits, and so forth. When you have no benefits, even small benefits are an improvement — but this shouldn’t require you to give up your rights to minimum wage or vacation or termination pay. The program will also make it much more difficult to measure the actual costs and earnings of working for Uber.

In its own survey of Vancouver drivers during 2020–2021, Uber maintains that about half of the company’s drivers work fifteen hours or less a week, a further third work fifteen to thirty-five hours, and a final 20 percent of drivers work more than thirty-five hours a week. It isn’t clear what percentage of total rides are delivered by each cohort of drivers — but it is reasonable to presume that the core twenty percent of the full-time driver workforce likely deliver a significant percentage of overall rides.

The same report claims drivers earn C$25 to C$35 per hour after all costs and deductions. Uber’s Toronto recruitment page offers a promotional offer with earnings of $1,800 over two hundred trips in Toronto, which works out to about $9.00 per ride before deductions (and is clearly a promotional offer, not a long-term rate). Other sources suggest that the average gross earnings vary significantly by location and time of day, and are almost always lower than Uber’s own glowing self-reports suggest. For Ontario, the unverified reports you can find on websites like Glassdoor, Quora, and Talent.com suggest earnings are closer to between $15 and $20 an hour.

The costs to the driver can vary significantly. Again, they are difficult to estimate or generalize. Uber estimated Vancouver drivers to have costs of $5.57 per hour. The Canadian Automobile Association website allows you to estimate your vehicle costs. It breaks down maintenance, licensing, insurance, depreciation, and fuel. These all vary by make and model, but are roughly $10,000 to $15,000 per year, which, at the very low end, for drivers working forty hours over fifty-two weeks, translates to $192 per week or $4.80 per hour. If we assume $20 in net earnings before Uber fees, and use the low-end estimate of $192 per week for our hypothetical forty-hour-per-week driver, the net is $608 a week, or about $15 an hour. This means that a full-time driver is earning Ontario’s minimum wage. It is reasonable to assume at least some might fall below that rate some of the time, given the volatility in earnings and costs.

This brings us back to the portable benefits plan. Assuming 2.5 percent of the hypothetical full-time drivers’ $800 weekly earnings are deducted for the benefits program, that full-time driver would contribute $20 a week to the fund, which, if they worked fifty-two weeks a year, would create a contribution of $1,040. If Uber matched that — which is not at all certain — we might see a total account value of $2,080 per year.

That figure is a maximum benefit amount at a 2.5 percent contribution rate, assuming full-time hours and full match by Uber. Uber has recently proposed that governments mandate these benefits for workers who work an average of at least twenty hours — of what the company euphemistically calls “engaged time” — per week. So-called engaged time will be measured from when a work order is requested to when the work is complete.

If Uber’s estimates of its workforce are accurate, almost half its drivers would not qualify for these benefits (recall that 46 percent of drivers work less than fifteen hours a week in Vancouver). Actual benefits will also be less if Uber doesn’t fully match their workers’ contributions.

What do workers give up in exchange for this benefit? Many of the protections usually afforded to employees under minimum standards employment laws. Ontario’s government has not yet outlined the full suite of protections on the chopping block. However, Uber’s recent advocacy suggests that the removal of minimum wage protection for all hours of work may be on the agenda. As an alternative, Uber is calling for the payment of 120 percent of minimum wage for “engaged time.”

This model mirrors California’s Proposition 22 and would likely amount to significantly less than payment of employment standards minimums for all hours of work. Although the details are vague, this would also presumably mean the surrender of other key protections like overtime, vacation, public holiday, and termination pay, and reimbursement of work-related expenses to ensure real wages exceed these minimums.

Beware of Those Who Boast of False Gifts

In one recent case, an adjudicator decided that a pizza company employing a delivery driver full-time had misclassified this worker by not recognizing their status as an employee. This driver, fired by the company for requesting to be treated as an employee, was working without overtime pay, minimum wage, public holiday pay, vacation pay, and termination pay. When the cost of these items, spanning roughly two years, was tallied up, the total owed to the driver was $25,812. This example makes the difference between the value of these protections and the Flexible Work+ account blindingly obvious.

It is estimated that there are one hundred thousand Uber drivers in Canada. If all those were full-time drivers, and Uber matched driver contributions to the benefits program, the total cost of Uber’s contributions would be roughly $100 million. Uber itself pegs its cost of Flexible Work+ at $40 million in Canada. For comparison, if Uber and Lyft were to make required contributions to only the mandatory Canadian pension and unemployment insurance schemes, that estimated cost would come in at $80 million annually.

Uber’s financial incentive in the portable benefits plan is obvious: it is less than half the cost of existing benefits to which employees are currently entitled. Further, if coupled with the carve-outs Uber seeks, it will save the firm from paying basic compensation to drivers — a cost that significantly exceeds that of Flexible Work+. The benefit and labor reforms Uber is seeking will ensure that workers are effectively providing a massive subsidy to the company’s business model.

Admittedly, these calculations are based on hypothetical examples rather than exact or true costs. They nevertheless demonstrate that there is a very significant cost to removing or reducing workplace protections. Workers will pay a steep price for Uber’s second-class sectoral employment laws.

Flexible Work+ is exemplary of the sort of brainchild produced through the synergy of platform entrepreneurialism and neoliberal governance. In this instance, a company that has never made consistent profits — whose best-case business plan is to abuse a monopoly position in any particular market — is working with Ontario’s government to reduce its costs through political means.

Together, Ford’s government and Uber will deprive drivers and couriers of the basic workplace protections to which every other employee in the province is entitled by rebranding this upward distribution of wealth as a social benefit program.

Bait and switch, Trojan horse, poison pill — whatever you call it, it is a bad deal for workers.