In Letter, Uber Said Drivers Didn't Make Advertised Earnings Due To Their 'Choices'

In January, Uber settled claims by the Federal Trade Commission (FTC) that it misled drivers about how much money they could make on the platform. But in a letter obtained by Gizmodo under the Freedom of Information Act, Uber argued that drivers were fundamentally at fault for earning less than the advertised rates because they were choosing not to drive enough.

The FTC accused Uber of making "false, misleading, or unsubstantiated claims regarding driver earnings" on its website and in ads on Craigslist, in an investigation that began in spring 2015. The company had claimed, for example, that drivers in New York earned a median $US90,000 ($117,498) annually and that drivers in San Francisco earned a median $US74,000 ($96,609) per year. The FTC investigation found that less than ten per cent of drivers in those cities earned the advertised rates, according to the agency's complaint. In fact, New York drivers' earnings were closer to $US61,000 ($79,637) and San Francisco drivers' earnings were closer to $US53,000 ($69,193), the FTC found. The FTC also alleged that Uber was misleading about the financing options it could offer drivers. Uber ended up paying $US20 ($26) million to the FTC to settle the matter, and the FTC said it would refund some of that money to drivers.

In the defensive letter sent November 7th, 2016, about two months before the settlement was announced, the company's lawyers disputed the FTC's allegations by claiming that it was absolutely possible for drivers to make the advertised sums and that drivers who made less did so by choice. Uber requested that the letter be kept confidential, and it offers an inside look at the company's perspectives. According to labour activists, the letter reveals Uber's dismal view of its drivers.

"On reflection we trust you will agree that no enforcement action is warranted," wrote Andrew Smith and John Graubert, attorneys at Covington & Burling who represented Uber during the FTC inquiry. "We see no basis for the central allegation that potential drivers were misled by earnings claims into taking on auto leases or purchases that were more expensive than originally advertised by Uber."

The letter argued that since Uber drivers are independent contractors rather than employees, the company couldn't be held responsible for their earnings. If drivers weren't earning the rates Uber had advertised, it was because the drivers weren't working enough - not because Uber had misrepresented their earnings potential.

"It bears emphasis that keeping prices low for riders requires a steady supply of drivers to meet their demand. Yet prohibiting Uber from advertising earnings that drivers can realistically expect to achieve - simply because those earnings exceed the earnings of drivers whose choices cause them to earn less - handicaps Uber in maintaining that supply," Smith and Graubert wrote (emphasis theirs).

Bhairavi Desai, the executive director of the New York Taxi Workers Alliance, a union that represents New York drivers and has sued Uber in an effort to get the company to classify drivers as employees rather than independent contractors, said the arguments laid out in the letter weren't necessarily shocking - Uber has made similar public arguments in the past - but that they were still offensive to Uber's drivers.

"What's really interesting is that the claim Uber usually makes is they're independent contractors because they can be flexible. Here Uber's claim is they are free to earn whatever they can. The only thing that separates a driver is the level of laziness," Desai said. "When drivers face the consequences of the business model, they say it's because the drivers are lazy or have wrong expectations."

Smith and Graubert argued that Uber shouldn't face any financial penalties for misleading drivers because they hadn't misled drivers at all.

"It would make no sense to give additional compensation to those drivers who earned less, as there are myriad reasons all within the control of the driver why that may be the case. Many drivers intentionally limit their hours and acceptance of trips for personal reasons, and a further payment would be entirely a windfall," they wrote.

Uber is right that some drivers choose not to rely on the app for full-time work. The company advertises flexibility as one of the perks it offers drivers, and many drivers choose to work part-time with Uber for supplemental income. About 60 per cent of U.S. drivers work fewer than ten hours per week, according to Uber. In cities with higher costs and more stringent regulation, drivers tend to work more -- in New York City, for instance, 64 per cent of drivers work more than 15 hours per week. Recent data released in the U.K. indicates that nearly a third of all drivers there are logged into the Uber app for more than 40 hours a week.

Desai objected to the idea that compensation from the FTC investigation would be considered a windfall. "If Uber was required to compensate drivers who earned less than promised, the idea that Uber would call that compensation a windfall, that's just outrageous. These are people who work long shifts and long weeks, with the expectation of pay the company has promised them," she explained.

In its complaint, the FTC objected that Uber claimed to offer "the best financing options available" for drivers who wanted to buy or lease a vehicle through the company's Vehicle Solutions Program. Uber didn't directly manage the program at the time and connected drivers to third-party lenders. The FTC argued that, since Uber didn't control the rates and they were often subprime, the company shouldn't claim they were the best available. (The rates were, in fact, bad, and the FTC found them to be worse than average for the industry.)

But in their letter, Smith and Graubert said that Uber couldn't be held accountable for using the word "best" in its marketing materials. "Leaving aside that descriptors such as 'best' are non-actionable puffery, Uber was justified in concluding that these were the best financing options available to the '[p]oor credit or no credit' borrowers targeted by this ad," they wrote.

Again, Uber offloaded the blame onto its drivers. Discrepancy between advertised leasing rates and actual payments were due to drivers selecting more expensive cars or upgrades while not increasing their down payments, Smith and Graubert said.

Uber brought some of its vehicle leasing programs in-house after problems with third-party lenders, but the program was ultimately deemed unsustainable and is being shut down.

Even though the company ultimately settled for $US20 ($26) million, Uber argued that the FTC had no reasonable formula for assessing damages. The agency had "identified no specific circumstance in which any individual has incurred specific, demonstrable injury," Uber's legal team argued, noting the FTC had not imposed financial penalties in other auto financing cases.

The FTC countered that drivers who attempted to cancel vehicle lease agreements after not receiving the earnings promised by Uber suffered "significant monetary harm."

Uber's $US20 ($26) million settlement was approved by the FTC in a 2-1 vote. FTC Commissioner Maureen K. Ohlhausen agreed with Uber's lawyers in her dissenting opinion, writing that the settlement wasn't tied to actual financial harm.

After the settlement was announced in January, Uber launched a "180 Days of Change" initiative aimed at making amends to drivers. As part of that effort, Uber added tipping options to its app for the first time. Uber now has a policy of advertising median earnings and including disclosures that explain how it arrived at the advertised amount, a spokesperson confirmed.

"We were pleased to have reached an agreement with the FTC earlier this year. Since then, we've made many improvements to the driver experience and will continue to focus on ensuring that Uber is the best option for anyone looking to earn money on their own schedule," an Uber spokesperson said. A spokesperson for Covington & Burling did not respond to a request for comment.

Although the arguments in the letter may seem somewhat harsh on drivers, the claims made in the document aren't entirely out of character for the company. In a video published by Bloomberg in February, then-CEO Travis Kalanick bickered with a driver who complained that rates had decreased, essentially arguing that the driver needed to work harder.

"I lost $US97,000 ($126,636) because of you," the driver in the video told Kalanick. "I'm bankrupt because of you. Yes, yes, yes. You keep changing every day. You keep changing every day."

"Some people don't like to take responsibility for their own shit. They blame everything in their life on somebody else. Good luck!" Kalanick said.

Desai said Uber's attitude towards drivers was upsetting. "Any Uber driver that reads it would feel really betrayed by the company, that this is how they're talked about behind their backs," she said of the letter.

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