Lyft: ‘The employer is a ghost’ for many drivers, expert says

Patricia Campos-Medina, PhD, executive director at the Worker Institute at ILR-Cornell University, joins Yahoo Finance Live to discuss Lyft’s business model and the lack of protections for drivers.

Video Transcript

- Well, Lyft stock is tanking after the company posted slowing revenue growth in its latest quarter and missed on rider expectations, that stock down nearly 21% right now. The company is saying it's a higher number of active riders, rides, and drivers it's had since COVID began, the company's Co-Founder and President John Zimmer speaking to our morning team today, talking about the platform's benefit to drivers. Take a listen.

JOHN ZIMMER: So we are seeing drivers come back strongly. It's an incredible earning opportunity, on average drivers earning over $30 an hour. And so I think it's really the independents, where they get to turn on and off work whenever they want. It's the high earnings potential during those hours.

- Joining me now is Patricia Campos-Medina, Executive Director of the Worker Institute at ILR Cornell. Patricia, we've heard from the company, John Zimmer, this morning, but also on the earnings call yesterday saying that they have seen driver growth accelerate here, as you've got a lot more people coming on board to try and make some extra income. I know you work directly with some of the drivers and to address some of their concerns. What are you hearing from them?

PATRICIA CAMPOS-MEDINA: Through our research of the app-based economy in New York State, we have found that part of the problem with the app-based economic model is that it has shifted all the responsibility of the business model to the employee.

And while they do like some of the convenience of choosing when and when to work, actually during times of like the pandemic, bad economic times, workers are left out on their own. And they do not have any protections or any basic rights to claim back some-- for protecting their health and safety rights, protections and benefits.

And the flexibility of when and when to work is actually not real because the app-based platform determines who gets to work when and why and how much they make. So this idea of flexibility is an idea that the companies are created to give this sense of independence to the independent contractor, but yet, the worker itself doesn't have any control over how much they make and when and when they work.

So that's why changing the model of the independent contractor model and giving workers a little more protections in the long term is essential. One of the biggest complaint the app-based workers have is that they really don't know who their employer is.

They log into a phone. They sign up. And if they have a complaint about wages that are unpaid, which happens a lot, or they get kicked out of the app, they have nobody to work. So the employer is a ghost. And so that's the model that we're trying to figure out, where is the power of the worker to actually demand more corporate responsibility from corporate America to invest in basic rights under the FLSA.

- And Patricia, when you think about this concern about whether, in fact, these workers would be classified as full time workers, that's sort of been the constant cloud hanging over companies like Lyft, but also their rival, Uber, as well as some of these delivery companies, like DoorDash.

I'm thinking back to when the administration, the White House, came out and said they were sort of considering a proposal to potentially change what would be the classification, we saw a huge dip in the stock. And these companies, including Lyft and Uber, have said the labor costs would increase by double digits. What's your estimate on how likely that business model is likely to shift, if in fact, what you're proposing becomes reality?

PATRICIA CAMPOS-MEDINA: The business model of companies like Uber and Lyft is always based on shifting all the liability of the business employment relationship to the employee and all the benefits to the stakeholder, to the shareholders. If we move into a model, which workers are demanding, which is to share on the responsibility of the employment relationship more toward corporate America.

There will be a reduction in shareholder profits. But that is what our society is demanding right after the pandemic, where workers, like drivers themselves, became frontline workers and became essential workers, a little bit more investment on their security through health and safety, through protection for benefits for basically paid family leave. All those benefits that majority of workers took for granted, these workers didn't have, in many states moving to regulating Uber and Lyft and granting some of those drivers unemployment insurance benefits.

So we saw that drivers were able to claim UI benefits because they were actually working permanently from the same app, from the same employer. So if we change the rules of who is considered an independent contractor, it will have an impact on how much of those liability gets shared between the employer, the corporation, and the employee.

So yes, there will be a shift, but the society will benefit providing more security for this workforce. Remember though, independent contracting rules do not only apply to app-based platforms. It applies all through our supply chain, from our truck drivers, from our distribution centers, from people who provide care through an app. Now you can sign up for somebody to come take care of your family at home through an app.

So the gig economy is a phenomenon across our economy. And these rules are trying to rebalance the power between workers and corporate America.

- Yeah, I mean, that explains even more why there's so much heightened interest in a potential change in the law or classification there. Patricia Campos-Medina, Executive Director of the Worker Institute at ILR Cornell, appreciate your time today.