Business

For Uber, loyal drivers and a new fight for benefits

Carolina Arguello, 38, and her 2-year-old son Andre Sarmiento sit in the 2011 BMW she uses as a driver-operator for uberX.
Carolina Arguello, 38, and her 2-year-old son Andre Sarmiento sit in the 2011 BMW she uses as a driver-operator for uberX. Miami Herald staff

As Uber wages its battle to change Miami-Dade’s taxi laws and operate legally, it also has recruited a growing fleet of drivers happy for the quick cash that the car service brings. Now it’s facing a new skirmish: whether an ex-driver can collect unemployment insurance.

This week, Florida notified Cutler Bay’s Darrin McGillis that he was in fact an employee of Uber while driving for the company earlier this year.

“I’m no longer an independent contractor,” the 46-year-old said while driving in the seven-seat Mitsubishi Outlander he bought to boost his Uber income. He’s now hoping there might be a change to pursue reimbursement on gasoline and even overtime. “All these things come into play.”

It’s a designation the San Francisco-based company is sure to fight, since it strikes at the heart of a business model that relies on freelance drivers jumping into the Uber network whenever they like. In Miami-Dade, the company is pointing to its economic impact as one reason elected leaders need to revamp outdated transportation rules and legalize app-based car services.

That’s the system that provided welcome relief for Carolina Arguello, 38, a former legal assistant who turned to Uber as a replacement for a stint of part-time jobs.

“My husband, who is a barber, started telling me about how some of his customers had become drivers for Uber and were making good money,” she said. She said Uber’s flexibility and compensation filled the financial gap after her son’s frail health led her to leave her $40,000-a-year job as a legal assistant. She tried part-time jobs, including a stint as a waitress, but the hours were long and the pay meager.

The state decision on McGillis’ employment status can be appealed, and Uber is fighting similar designations on multiple fronts across the country. A class-action suit against Uber in California asks a judge to declare Uber drivers employees of the San Francisco-based company.

An Uber spokesman declined to comment on McGillis’ claim, and a DEO spokeswoman said the agency can’t discuss individual cases. But the dispute opens another local front for what may be the most besieged business model in America, with Uber operating illegally in Miami and elsewhere but still reaping millions in fares.

Peter Burton, an executive with the National Council on Compensation Insurance, said the McGillis claim is just the latest to test where the Uber business model falls in the spectrum of employment law. At issue is a range of added expenses for Uber, from having to pay unemployment insurance and Social Security benefits to paying a minimum wage.

“It’s an open question right now,” he said. “We’ll have to see where the wind blows.”

The big question is how much control Uber exerts over its drivers, who respond to fares using the company’s smartphone app. Uber claims the system is similar to freelance taxi drivers, who simply accept calls broadcast out from a dispatch center. Lawyers fighting Uber say the company’s termination policies and standards for drivers are extensive enough that an employer-employee relationship exists.

“Uber is trying to sell itself as this branded service, which is how Uber sets itself apart from taxis,” Shannon Liss-Riordan, a Boston lawyer leading a class-action suit against Uber. “Generally, taxi drivers aren’t under the same level of control as Uber.”

A source familiar with Uber’s operations but not authorized to discuss legal strategy said the company has successfully overturned similar administrative actions in other states

Whichever side ends up winning, McGillis’ brief, lucrative stint as an Uber driver provides another window into the company’s success as an upstart transportation provider in Miami-Dade County. Since the company launched in Miami-Dade in June 2014, more than 10,000 active driver-partners have taken home more than $30 million through more than three million rides, the company said this week — net which doesn’t include above the company’s commission, typically less than 20 percent. (By comparison, Philadelphia, where UberX launched in October, has lured 6,000 drivers who had earned $9 million as of April, the company said.)

Uber claims double the number of drivers in its Miami-Dade network than the nearly 5,000 licensed cabbies in the county’s capped taxi system. While the county’s regulatory arm counts nearly 2,000 citations against Uber drivers, the county’s mayor and tax-funded tourism bureau are urging commissioners to change the law to legalize Uber and its competitor, Lyft.

It’s been a rocky year on the political front for Uber in the Sunshine State. It failed to secure a change in Florida insurance regulations needed to mesh with its corporate approach to insuring its drivers only for when they’re on a fare authorized by an app. A session before the Miami-Dade commission dedicated to changes in for-hire rules was canceled this week on the heels of the Transportation committee dismissing a proposed ordinance backed by Uber and its smaller competitor, Lyft.

The local taxi industry casts Uber as trying to operate a pseudo cab operation in Miami-Dade without obeying the regulations designed to protect passengers. While taxi fares are set by the county government, Uber adjusts its fees to meet demand. While taxi drivers are subject to a county licensing process and must use vehicles outfitted as cabs, Uber and Lyft drivers simply use their own cars.

Uber sees the taxi industry trying to cling to an outdated monopoly that allows powerful owners to benefit from the capped system of government-issued taxi “medallions,” which are now worth six figures because they are only about 2,100 of them. While the current system provides only an aging fleet of taxis that may not be equipped for credit-card sales, Uber and Lyft let passengers pay by phone and ride in drivers’ personal vehicles. Passengers can rate drivers, encouraging upkeep and good service.

Initially wary about driving strangers — “I’m a woman and I was very nervous, because Miami can be very dangerous” — Arguello became a convert. Today, she makes about $600 per week for 25 to 30 hours of work. Uber helped her secure financing for her new vehicle, upgrading from a 2005 Volkswagen Passat to a 2011 BMW.

“Now, I start work at 10 p.m. after I put my kids to sleep and come home at 3 a.m.,” she said. “I get up at 9 when my son wakes up and take naps during the day when he does.”

Carlos Diaz, 32 and an ex-Marine, is also hooked by the ability to spend time with his family.

When he returned home from a four-year tour including a stint in Okinawa, Japan, Diaz had a difficult time finding a steady job that paid well.

“I was between jobs when I applied with Uber and was hired within a month,” says Diaz, who is now earning $600-$700 per week. “I’m meeting people from all walks of life. The other day, I drove a gentleman who is one of the writers for CSI…”

As a father with three daughters, “I can work whenever I want for however many hours I want, and that flexibility is priceless,” he says. “I can wake up in the morning, take my girls to school, go drive, pick them up, feed them, put them to sleep and go out to drive again. I am sacrificing some sleep, but it’s worth it.”

McGillis, a one-time music promoter who ran a long-shot campaign for county mayor in 2011, said he, too, started out as a major fan of Uber. He had been through a string of jobs in 2014, with seven companies landing on his unemployment-benefit records for that year. In the fall, he responded to a Craig’s List ad from Uber, which touts the ability to “make up to $750/wk driving” and “be your own boss” and “drive when you want.”

He signed up for the Uber network and in November began picking up riders in his 2014 Mirage Mitsubishi, under the “UberX” program, which is open to basic cars. A 1099 tax form from an Uber corporate entity showed him earning about $15 per ride, with $3,600 in November and $5,900 in December from 617 rides from Raiser LLC, an Uber corporate entity.

McGillis said the key was to drive during peak times, when Uber rates “surge” far higher than the standard charges. An email McGillis provided from Uber showed the company guaranteeing pay of $20 an hour during peak times on Friday and Saturday, provided drivers accepted at least 90 percent of trips offered them and take at least one fare per hour.

“Art Basel was just ridiculous money,” he said. “You could work just Saturday and take home $300 or $400 in one day.”

At the start of 2015, McGillis said he decided to pursue a higher income by entering Uber’s XL program and avoid a commission increase for the UberX drivers. He said he declined Uber’s financing program but borrowed money on his own to purchase a 2015 Outlander for about $30,000.

The trouble came during the Ultra Music Festival in March. An Uber passenger opened his Outlander’s door only to have it whacked by a scooter, according to McGillis’ account. An email exchange between him and the company show that Uber urged him to file a claim, but McGillis wanted the passenger’s address to pursue reimbursement. Uber refused, citing privacy concerns.

“I am going to the passenger’s home tonight to get their names since you won’t provide them,” McGillis wrote in a March 30 email to an Uber executive.

By April, Uber had deactivated McGillis’ driver account, freezing him out from potential fares. It also paid for the damages. He filed for unemployment benefits, saying he was wrongly terminated. Uber has until June 9 to appeal the state’s ruling. McGillis said he’s living off of savings and facing a $600 monthly car payment he can’t afford.

“I’m a single guy. I don’t need an SUV,” he said. “Here I am in this big car. What am I supposed to do with it?”

Miami Herald staff writer Rene Rodriguez contributed to this report.

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