Uber Faces Doom as CA Judge Recommends Suspension

California Public Utilities Commission (CPUC) Chief Administrative Law Judge Robert Mason recommended that ride-sharing service Uber be suspended from operating in California for 30 days and fined $7.3 million for wilfully violating its 2013 CPUC settlement by failing to provide data proving that Uber and its California drivers do not discriminate on the basis of ethnicity, neighborhood or medical disability in picking up passengers.

Uber’s very profitable business model is built on undercutting traditional taxis’ cost structure. Both the suspension and being forced to comply with the CPUC agreement represent an existential risk to Uber’s viability.

The settlement Uber signed with the CPUC suspended all prior complaints and fines levied against the company for failing to obey state anti-discrimination laws and CPUC regulatory provisions regarding its ride-sharing services, contingent upon Uber’s future compliance with laws and regulations in the future.

Uber also agreed to provide detailed reporting regarding the number of requests for rides from people with service animals or wheelchairs; how many such rides were completed; and other ride-logging information such as date, time, zip code and fare paid.

The 2013 California settlement set a standard for similar legal and regulatory agreements for ride-sharing companies operating in major cities such as Washington D.C., New York City, and Boston.

But Judge Mason’s 96-page decision states that while Uber provided some information, it failed to comply fully with requirements for reports in three areas: the number of driver accidents and amount sof compensation paid; the number of rides requested within each zip code, and how many were accepted or rejected; and the number of requests for accessible vehicles by wheelchair users and blind people with service dogs, and how many of those requests were accepted.

Uber’s business model is to keep 20 percent of all “fares” by recruiting contract drivers, advertising that they can make $18-an-hour using their own car as an on-call limo, versus about $8-an-hour as a taxi driving employee.

By turning employees into entrepreneurial “gig” workers, Uber saves about a 30 percent mark-up by eliminating Social Security and Medicare taxes, as well as unemployment and workers’ compensation insurance. Uber also avoids paying employee benefits that cost an average of $10.61-an-hour, according to the U.S. Bureau of Labor Statistics.

Uber drivers generally do believe that they are making a profit by “sharing” their own personal vehicles and paying for their own gasoline. But the entrepreneurial drivers are not interested in subsidizing Uber’s legal and regulatory requirements to provide “equal access” for the disabled by purchasing a $60,000 wheelchair accessible vehicle.

As entrepreneurs, driver’s want to “contract” with Uber to service peak demand hours around high-volume area zip codes. But those Uber entrepreneurs have little or no interest picking up rides from poor people in dangerous neighborhoods.

Since September, Uber has called many of the CPUC’s data demands “unduly burdensome, cumulative and overly broad.” The company also complained that producing certain data would disclose of some of the company’s trade secrets. The CPUC rejected Uber’s complaints and demanded immediate data delivery compliance.

Both Uber and Lyft have been sued for allegedly denying service to passengers with wheelchairs, riders with guide dogs, and blind people.

Wednesday’s ruling made the stunning disclosure that Uber, despite having signed the 2013 settlement to provide data that it was fully in compliance with anti-discrimination laws and regulations, told the court it could not deliver data regarding ride accessibility because Uber did not have an “accessible-vehicle ride feature in its app” during the reporting period.

Judge Mason wrote that Uber’s subsidiary in California “had the ability all along to comply with (the) reporting requirements…yet declined to do so by interposing a series of unsound legal arguments and objections.” Such comments would seem devastating to Uber’s defenses in the disability discrimination law suits.

Breitbart News warned in April that it was a sign of Uber Technologies’ deteriorating defense posture that it dumped its attorneys Morgan, Lewis & Bockius and hired Gibson, Dunn & Crutcher in what could be a catastrophic fall jury trial asserting its drivers are employees versus independent contractors.

We also reported in June that Uber had lost its first case in front of the California Labor Commission, where an Uber driver was deemed an “employee,” rather than an “independent contractor.” Although the case only involved one driver, it laid out a roadmap for a mass tort litigation that all Uber drivers are employees.

Despite dozens of lawsuits and regulatory battles across the US and around the world, Uber was able to close another $2.8 billion in venture capital pixie dust in May at the incredible valuation of at least $50 billion. There is no doubt that Uber’s business model is more profitable than taxi services, but that assumes Uber is able to continue to avoid complying with employee and anti-discrimination laws and regulations.