[quaquaqua1]

It does matter. Here's why:

Uber agrees to pay X rate currently to drivers. A law is passed that makes X rate even more unprofitable.

Uber then engages the services of an external company which provides labor at a lower rate, fires all of the current Uber drivers, and encourages them to work for the new external company.

The external company, if sued, does not have the resources that Uber has, and simply goes bankrupt. The drivers are encouraged to work for yet another new company.

This process continues for a while as ride quality and driver satisfaction all suffers. Uber gets to lengthen the runway a bit longer, and either a miracle happens and the company continues operations or some other competitor swallows the market.

[scardine]

Interesting, in Brazil all the companies in the chain are liable in a labor-related law suit. Before the 2017 Labor Reform[1], frivolous law suits by former employees were a billionaire market because it used to be a risk-free gamble - after the reform the litigant is liable for exaggerated claims and there was a 46% drop in labor cases[2].

When I look at any market where the labor code is excessively protective, I see high unemployment rates specially among the young - Brazil, Spain, France[3]... I don't know about causation but clearly there is a correlation between employee over-protection and unemployment rates. I think it is the law of unintended consequences[4] in action: the legislator intention was good (protecting employee) but the net result is negative.

[1] https://www.jonesday.com/en/insights/2017/12/brazilian-labor...

[2] https://www.capital-ges.com/an-insider-view-of-the-brazilian...

[3] https://countryeconomy.com/unemployment

[4] https://en.wikipedia.org/wiki/Unintended_consequences

[quaquaqua1]

There is definitely a causation for high unemployment by such laws. But it actually goes even deeper.

In France for example, it is difficult for a company to fire an employee once they are legally hired.

Oracle, for example, has a policy of initiating an "intra-country transfer" where the employee is mandated to relocate from Paris to Montpellier. Not everyone wants to uproot their family like that. And then if they do accept the move, next year Oracle will relocate them to Bordeaux...

[scardine]

Interesting, so in France you can't fire someone but can legally make his life miserable through constant relocation? Brutal...

[quaquaqua1]

Correct, it is insane!! It is "legal" in the sense of "the law didn't specifically plan for this workaround that a particularly greedy company found"

[Aeolun]

I guess it’s more like in France, instead of being fired with no recourse, you can opt to be relocated instead (at least that’s what it works out to).

[scardine]

As I understood, once you hire someone in France the labor code makes it virtually impossible to terminate the contract.

In Brazil employers have to pay a fine if they fire a worker without a "fair cause" (~ 3.2% over the sum of all compensation paid to the employee while they worked for you), so the longer someone worked for you the more expensive it gets to fire them.

[gamblor956]

The law allows for veil piercing in situations like that, meaning they could skip the temporary intermediaries and just treat Uber as the employer.

Believe it or not, they did think of issues like this when drafting the law. Especially since almost all of these other issues brought up in the comments are decades old and already addressed by existing labor laws.

[quaquaqua1]

That was not immediately known to me, because in New York where my family member is a lawyer, something like the following will happen:

Company X owns Company Y. Company Y builds an apartment building of low quality and hides the defects. They sell the apartments to individual buyers.

The individual buyers sue Company X years later upon finding the defects. The judge throws out the lawsuit and says "you can only sue Company Y, because that is the legal entity who built the building."

The only issue is that Company Y is several million dollars in debt to Company X and has absolutely no way of repaying anyone who sues Company Y.

[bernawil]

Others are pointing out the problem with staffing companies too, but this reminds me of my experience (different countries, so YMMV). This means that even though "The law allows for veil piercing" there's a huge maybe there, companies unloading their liability know this and have great lawyers. So IF a lawsuit gets to the real employer it's only after a LONG legal process, so not worth as much.

[nroets]

There is also another reason: If Uber employs the driver and he/she acts unprofessionally, then it's a lot of work to fire him/her before they can hire someone else. (Uber does not want to drag passengers into any type of litigation)

If Uber deals with many companies, they can just reduce demand at the company with the bad driver and increase demand at another one. The company with the bad driver can then retrench him, saying they need to cut someone.

(Disclaimer, I know very little about Uber and the US and it may not work for them specifically. But the idea certainly applies to other companies)