Buffalo Law Journal – Uber hounded by workforce, legal issues

June 16, 2017

When Uber opens for business in Western New York in a few weeks, the ride-sharing company will be bringing a host of legal and ethical issues with it.

In fact, the issues could be “existential,” said Matthew Pelkey, an attorney at Colligan Law LLP who works with local startups.

Issues range from workplace claims of harassment and discrimination to running afoul of the New York State Joint Commission on Public Ethics. The sheer amount of issues the company faces is “shocking,” he said.

“This could go down as one of the best examples of how not to run a company,” he said, “short of defrauding investors.”

The state ethics commission recently announced that it reached a settlement with Uber after the company failed to disclose more than $6 million in lobbying expenses in 2015-16.

Uber agreed to pay a fine of $98,000, according to the commission. The settlement is the largest reached under the commission’s compliance program.

According to reports about the fine, Uber disclosed $3.1 million in expenses when the actual number was closer to $9.4 million. Most of the spending was for an advertising campaign geared toward regulations in New York City, where Mayor Bill de Blasio pressed legislation to check the growth of the company’s app.

According to the settlement, Uber cooperated fully with the commission and attributed the nondisclosure to an error by a filing firm used by the ride-sharing company. Uber also made a mistake in reporting the expenses, the settlement said. The company has updated its filings with the commission.

In a statement, Uber said it no longer uses the third-party company to manage its state filings.

“We updated our reports because there were unintentional omissions from our initial disclosures,” the company said. “Uber NY has revised its processes and no longer uses the third-party filing firm who prepared these disclosure statements.”

Last week, Gov. Andrew Cuomo announced new regulations for the rollout of ride-sharing services across the state as of June 29.

“Extending ride sharing across New York is a matter of fairness that brings new transportation options and, with it, new economic opportunity and innovation,” Cuomo said. “This framework provides for a fair, safe and compressive ride-sharing system that will benefit communities in every corner of this state.”

Lawmakers voted to move up the start of ride-sharing services across the state by 10 days to June 29, in order for the services to be available for the July 4 holiday.

Pelkey said the ethics issue in New York is small compared to the other issues the company is dealing with. Uber hired former Attorney General Eric Holder to conduct an audit of the company. His report is damning of the culture that was allowed to inhabit the company. Holder’s investigation stemmed from a February blogpost by former Uber engineer Susan Fowler Rigetti that detailed the sexual harassment and gender discrimination she said she experienced.

“It’s very easy to see how a company with billions of dollars in capital and a corporate culture that’s Machiavellian at best ended up where it is,” Pelkey said.

Several members of the leadership team at Uber have either taken a leave of absence or stepped down, including CEO Travis Kalanick, who took an extended leave of absence. The board of directors voted to adopt all of Holder’s recommendations in his report to the company. They include limiting alcohol at company events, increasing workforce diversity and adding an independent board member. Ironically, board member David Bonderman resigned last week after audio of the meeting to discuss the changes was leaked to Yahoo News. In the audio, Bonderman said that adding more women to the board would lead to “more talking.”

The company is also dealing with a lawsuit with Waymo, Google’s autonomous car spin-off. According to the suit, former Google employee Anthony Levandowski left to start his own company called Atto, which was acquired by Uber several months later, and took 14,000 confidential documents with him. An Uber vendor accidentally sent an email to Google, Pelkey said, indicating that the designs Uber was using for its autonomous car were actually Google’s. Uber denied using Google’s designs, while Google maintains that Uber was aware of the documents.

The case is playing out in the Northern District of California.

“This isn’t a small matter,” Pelkey said. “You’re looking at autonomous self-driving vehicles, which could be a revolutionary industry inside of five years. This was Uber’s path to profitability. This could be a multi-billion-dollar industry in the U.S. alone. There’s a real battle here over who owns the rights and whether or not there was a misappropriation of trade secrets.”

An issue that could be coming down the road once Uber starts operating statewide is its designation of drivers as independent contractors as opposed to employees, Pelkey said.

“New York does have some strict applications of that,” he said. “They’re going to look at that very carefully. If Uber has to classify all of its drivers as employees, that creates some real problems for them.”

The original article can be found on the Buffalo Business First website: