By Mark F. Kluger and William H. Healey
In the last few weeks, Uber’s antics have provided us with enough material for a five-part series on employment law don’ts or a semester long course at Harvard Business School. Where do we start?
Sex in the Front Seat
It all began to unravel this past February when a former Uber engineer outed the firm’s frat-boy culture in a detailed blog post, describing rampant sexual harassment, other forms of discrimination and bullying–all of which was tolerated, if not condoned, by senior management. And we thought these tech companies were supposed to be so progressive. There was enough corroboration that the Board of Directors launched two investigations, one by former U.S. Attorney General Eric Holder into company culture, and a second by a different law firm looking solely into the sexual harassment and discrimination allegations. Full employment for lawyers; all is well.
Uber has 12,000 employees, mostly engineers and support staff in its San Fran headquarters, and 200,000 drivers–but they are independent contractors, or are they? More on that later. The firm investigating the sexual harassment and discrimination claims reviewed 215 recorded complaints dating back to 2012. That is one complaint for every 56 employees. In early June, after the sexual harassment investigation, Uber announced that it fired 20 employees, gave 7 final warnings and re-trained 31 managers. Holder’s report made two recommendations which the Board has implemented: prohibit sexual relationships between supervisors and subordinates, and minimize alcohol and drug use in the company. Seriously? Can you imagine the uber legal fees that advice cost Uber? We could have told them that for half of what they paid Holder.
Case not closed. It seems that one of the 20 fired employees did not think getting the axe was fair because it was the CEO who really set the rules. So someone leaked the CEO’s 2014 company-wide email regarding how to behave at a company retreat. So Uber has a leaker too! Anyway, the email, which started, “read this or I’ll kick your ass” (charming), stated: “Do not have sex with another employee UNLESS (a) you have asked the person for that privilege and they have responded with an emphatic YES….AND (b) the two (or more) of you do not work in the same chain of command.” You see Holder, they already had the chain of command policy. Remarkably, the CEO (Travis) did not stop there. He added: “yes that means that Travis will be celibate on this trip. #CEOLife.” And his email continued as follows: “We do not have a budget to bail anyone out of jail;” “Do not throw large kegs off tall buildings;” “There will be a $200 puke charge for public displays;” and “Drugs and narcotics will not be tolerated unless you have the appropriate licensing.” It’s easy to see why there were 215 harassment complaints in less than 5 years.
When this type of communication that comes from the top, no matter how much Travis was just trying to tell the troops to have fun, such a message in a business context is a recipe for uber trouble. And then…
India Rape Case
In 2014, a passenger in India claimed that her Uber driver raped her. The media there questioned the company’s background check policy because the driver had been held for months on an unrelated rape charge before Uber hired him. Uber immediately improved that process. But several senior executives, including the SVP of Business (the CEO’s right hand) and the President of Business in Asia, did not believe the victim. In fact, they were convinced that her allegations were part of a plan by Ola, Uber’s main competitor in India, to discredit the upstart. As a result, Uber somehow obtained the victim’s medical records in an effort to find a way to discredit her. The driver, however, was convicted of raping the passenger. Her medical records made their way around the company anyway–and both senior executives kept their jobs. Only when the story about the medical records leaked a few weeks ago did Uber terminate the senior execs who cooked up the scheme. And then….
The Board Won’t Take a Back Seat
Last week, at an all hands staff meeting, after announcing that the CEO would be taking an indefinite leave, Board member Arianna Huffington declared, “this chapter comes to an end today.” You wish Ari! While touting evidence that having one woman on a Board will lead to the willingness of others to join, Ms. Huffington was interrupted by a fellow Board member who said, “Actually, what it shows is that it’s much more likely to be more talking.” Right, so sexist remarks by a Board member at a meeting of all employees to describe a culture shift away from Animal House…not good. The Board member resigned the next day. Huff Post immediately published an article that described a 2012 academic study showing that it’s men who cannot shut up in meetings attended by men and women.
One more awkward moment: the meeting started with the head of Human Resources asking all employees in attendance to turn and give hugs to each other. HR 101: don’t encourage employee touching, never demand it, and never ever do it in a meeting about ending a culture of sexual harassment. Maybe some train the trainer is in order.
Hit the Breaks-Hope the Airbags are Working
In what might be the worst news yet for Uber, late last week it became public knowledge that last year a New York State Department of Labor Administrative Law Judge dealt a potential blow to Uber’s business model. Two Uber drivers applied for Unemployment Insurance benefits. Simple…right? Nope, not if they are independent contractors. Only employees are entitled to Unemployment Insurance benefits. Neither Uber nor its drivers pay into the state fund because ICs are not entitled to that or any other employment benefits. But the NYS Department of Labor ruled that the drivers are entitled to such benefits. That means that NYS considers at least those two drivers to be employees of Uber. If other drivers push the issue, the gig economy’s IC model may crumble and the cost structure for the business may crash and burn.
It looks like Uber may need a lyft. Stay tuned, there may be more to come.