Uber Technologies Inc. has spent and fought to keep its drivers from becoming classified as employees instead of contractors, and investors finally got a glimpse of the financial reasons on Wednesday.
Uber UBER, -3.42% broke out $600 million from its total revenue of $3.5 billion to account “for the resolution of historical claims in the U.K. relating to the classification of drivers” in its first-quarter earnings results. That is a direct result of a U.K. Supreme Court ruling in March that led Uber to classify tens of thousands of drivers in the U.K. as employees.
Uber disclosed in March that it could have to pay claims of back pay due from British drivers in the case, including holiday pay, wages to equal the minimum and, potentially, pension contributions. That would be on top of what the company already paid the drivers in the 2016 case.
That puts a dollar figure on a longstanding concern about Uber and the other “gig work” companies — what it would look like financially if they had to treat drivers as employees. And it is nothing to sneeze at, blowing away the $200 million Uber and other gig companies spent to pass a new law in California in their quest for a “third way” for employment law. That win could be moot, though, as President Joe Biden’s new secretary of the Labor Department said last week drivers should receive the benefits of employment in most cases, spooking some investors.
For more: Here is how the Biden administration could change gig work
Uber shares initially went higher in after-hours trading Wednesday, after the company papered over the “accrual” and continuing losses with the $1.6 billion sale of its self-driving unit, but fell back to a 4.8% decline in the extended session as executives discussed increasing costs for drivers and faced an immediate question about Labor Secretary Marty Walsh’s comments.