After years of debate over classifying gig workers as contractors rather than employees, Uber CEO Dara Khosrowshahi outlined his vision for a new way to provide healthcare benefits for contract workers logging full-time hours.
Drivers should earn healthcare benefits commensurate with the hours they work, he said Friday in an interview on CNBC’s “Squawk Box.” Uber is prepared to create a system to pay for those benefits, too, he said.
The suggestion comes as Uber and other gig economy businesses face mounting pressure to provide healthcare and other protections for their workers, including in the form of a lawsuit from the California Attorney General. The coronavirus pandemic has magnified the burden and risk gig workers take on by interacting with customers without the financial protections that come with the status of a full employee.
Khosrowshahi said the new model would allow Uber to be an “entry point” into earnings for workers where they could choose to secure healthcare benefits by working more hours or forgo some of those benefits by working fewer hours. But rather than have a cut-off at 20 hours, for example, Uber would pay for benefits on a sliding scale of hours worked.
“I think this system of if you don’t work 40 hours, you’re not full-time, if you work 40 hours, you’re full-time, and then there’s this hard break between the two, that’s the old world,” Khosrowshahi said. “If you’re putting in the hours, you should get minimum earnings based on the hours that you’re working and you should get healthcare based on the hours that you’re working. And if you have haves and have-nots based on a particular number of hours worked, that doesn’t make sense… in a technical, forward world.”
Khosrowshahi said Uber would put money into a fund based on the hours workers put in. That fund would pay into workers’ healthcare benefits and minimum earnings. He said Uber is aiming for “generally comparable” healthcare to what workers would receive as full-time employees.
“What we’re looking for essentially is that flexible on-ramp or off ramp,” he said. “You want to work, you get the benefits, you don’t want to work, you don’t.”
Uber is now facing a lawsuit from the California Attorney General and three city attorneys in the state. Lyft is also a defendant in the case that alleges the companies denied workers key privileges by misclassifying them as contractors rather than employees. The lawsuit was filed under California’s new law, Assembly Bill 5 (AB5) that aimed to provide stronger protections for workers, especially in the gig economy.
But Uber has consistently fought back against the bill and has argued for a new way of thinking about worker classification altogether. In a letter to President Donald Trump in March, Khosrowshahi advocated for a “third way” of classifying workers other than contractors or employees, in order to maintain the flexibility he said gig workers enjoy while providing them with additional benefits.
The letter also asked for gig workers to gain access to unemployment benefits allocated in response to the coronavirus pandemic. While those funds were ultimately included in the bill, some gig workers have still had trouble accessing those benefits or proving eligibility.
Uber has had to push its goal of reaching EBITDA profitability by the end of the year due to the pandemic’s toll on ridership. The company reported a net loss in the first quarter of 2020 of $2.9 billion after seeing gross bookings on its core business segment, Rides, fall 5% year-over-year. But Uber’s stock shot up as much as 10% after hours Thursday as Khosrowshahi told analysts on the company’s earnings call that Uber has begun to see some signs of recovery. Ride volume has been up each of the last three weeks and its food delivery service has been booming, he said.
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