On his way out to the cabstand at LAX in September, my friend Jason was accosted by several unlicensed taxi drivers, all eagerly asking, “Need a cab?” — just like they do at the airports in and around New York City, where so-called “gypsy cabs” have operated for decades. Unlicensed cabs had rarely been seen at LAX until then, though; their sudden appearance was apparently owing to a city council vote in August, the subject of much lobbying, to allow Uber and similar services to pick up and drop off passengers at the airport. The thing is, the unlicensed cab drivers vying for Jason’s business weren’t using Uber: They were approaching him directly.
Since September, most of the gypsy cabs at LAX appear to have been chased off; the city council might have given its permission, but there was still an application process from airport authorities to get through, which turned out to be a fairly complicated matter, and there was some trouble in accessing the required operational information, the Los Angeles Times reported. And although Lyft finally began picking up passengers at LAX in late December and Uber is expected to follow soon, the airport will make ridesharing companies jump through a similar number of hoops. There’s a $4 fee for each pickup or drop-off at the airport, which will presumably be passed on to passengers, and drivers have to wait in a holding area containing no more than 40 other rideshare drivers until they receive a request for a ride.
But still, Jason’s experience got me interested in the question of off-the-books Uber rides, which, as it turns out, are starting to look like a trend.
By arranging a private fare, drivers stand to make a lot more money by removing Uber’s commission. Passengers, too, have realized that they can ask for — and get — discounts on privately scheduled rides. This being the case, there’s a growing buzz suggesting that all kinds of private ride-sharing arrangements are being made all over the country.
David, another friend in New York, told me that he, too, was saving a lot by cutting Uber’s hefty commission out of the loop. He has trips to make on set days, so it’s easy for him to schedule rides off the books with the UberX drivers he knows and likes. A casual survey of message boards and comment threads on business and travel sites reveals others admitting they’re doing the same. “The inability to pre-book a ride, IMO, is the biggest drawback of Uber,” wrote a commenter on TripAdvisor. “That said, I know a frequent user of Uber who makes private arrangements with drivers for a pick up at a certain time [when he’s in Paris on business].”
This new development highlights the precarious position of Uber, which enjoyed a valuation estimated at $62.5 billion in December (with talks of a $70 billion valuation in the offing since then). With so few barriers to entry for competition, and such powerful incentives for drivers and passengers to take their business off the app, how long can the company continue as the world’s most valuable venture-backed startup?
You aren’t violating your contract with Uber should you make such a private deal, because the same loophole that makes Uber a competitive alternative to conventional taxis makes it legal for you to take your business outside their service. Check out Uber’s Terms and Conditions: There isn’t a syllable regarding any subsequent arrangements you might make with so-called “third-party providers” — as Uber calls its drivers (in order to avoid the potentially problematic term, “drivers”). This is the very loophole, I might add, that the company is in various courts fighting tooth-and-nail to keep open — its designation of drivers as “third-party” independent contractors rather than employees.
Put simply: If Uber drivers aren’t employees, Uber can’t fire them for making side deals. But treating their drivers like employees would cost the company money that they would apparently prefer not to spend.
But if Uber can’t fire its drivers for taking off-the-books rides, the city is free to go after them for operating as unlicensed taxis. In essence, an off-the-books Uber ride is no different from a gypsy cab. “Operating a gypsy cab is illegal, period,” Los Angeles Taxi Commissioner Eric Spiegelman told me. “The city can absolutely prosecute them, and it’s traditionally the city’s job to do so.” LADOT and LAPD have run joint sting operations to catch UberX drivers accepting street hails, he said.
But now that we have Uber and Lyft, huge ride-sharing companies staffed by barely vetted non-employees, hasn’t the city basically made gypsy cabs legal?
As independent contractors, Uber drivers aren’t entitled to expensive worker protections required by law, such as paid leave, health insurance and unemployment benefits. Uber is the poster child for the so-called “1099 economy.” But if Uber is itself “disrupted” in court, it’s fair to assume that its business model, and its dizzyingly high valuation, will begin to look mighty rocky.
Because what, exactly, is Uber bringing to the table, when you arrange for a ride? Very little, apart from the convenience of their app, the use of which costs UberX drivers a hefty commission — up to 30 percent, in some instances — a commission you, the passenger, are paying in full.
But guess what else you can use your phone for, besides arranging for a ride via an extravagantly-priced app? Calling a driver whom you trust directly to schedule a ride that will leave both you and your driver with more cash than you’d have had after using Uber. It isn’t only Jason and David who have figured this out.
Maria Bustillos is a Los Angeles-based writer and editor.