Compliance Lessons From Uber: Takeaways for Tech Startups

by Nilan Johnson Lewis PA
Contact

While the media has widely covered the resignation of Uber’s CEO Travis Kalanick, it has largely ignored important lessons that tech startups can draw from Uber’s experience. In fact, the series of events leading up to Kalanick’s resignation read like a laundry list of what tech startups should avoid as far as personnel management and employment compliance policies go.

Uber’s meteoric rise was fueled by an unrelenting focus on growth. Formally founded in March 2009 as UberCab, the company had already secured more than $10 million in funding and was valued at $60 million by early 2011. Just two years later, in August 2013, Uber was valued at $3.76 billion. As any tech entrepreneur knows, Uber’s aggressive growth strategy is understandable and was in some respects necessary to its survival. Tech startups face significant competitive pressures and operate in a cut-throat environment where every dollar in funding is vital.

But the company’s fixation on growth created a toxic corporate culture. For instance, the company measured employees’ performance with respect to business performance metrics almost exclusively and, thus, was willing to overlook clearly problematic behavior. As Susan Flower explained in the blog post that exposed Uber’s sex-discrimination and harassment problems, even HR refused to punish or stop blatant sexual harassment because the offending manager was a “high performer.” In other words, the division (or department) responsible for ensuring that Uber remained a harassment- and discrimination-free workplace came second to the growth mantra. It’s telling that Uber did not hire its first official head of HR until 2014, when it already had over 500 employees. Likewise, it speaks volumes that by the middle of 2016, when the company already had more than 6,000 employees, there were fewer than 10 human resources business partners in charge of training and handling issues like sexual harassment. In sum, when it came time to allocate resources for personnel management, Uber’s leadership chose to overlook compliance in favor of recruiting additional people.

The lesson here is clear: while growth should remain the primary goal, it’s also important to foster a lawful, functional workforce. Leaders of early tech startups—e.g., its founders—often ignore labor and employment compliance because they lack experience leading a large workforce and, as such, do not anticipate all the complications of doing so. They make decisions to allocate scant resources by focusing almost entirely on short-term returns on investment, all the while ignoring that it’s important to inoculate the company against significant problems that can be very costly in the mid- to long-term future. But as Uber has demonstrated time and again—whether with respect to its wage-and-hour woes or its discrimination and harassment problems—ignoring workforce problems at an early stage can have ruinous consequences on the business and the brand as a whole. Investing in compliance is actually a savvy business decision.

To avoid repeating Uber’s mistakes, tech startups should design labor and employment compliance plans. This does not mean that every tech startup needs to hire sophisticated HR professionals or develop highly sophisticated auditing procedures as soon as it hires its first employee. The compliance plan should simply identify potential pitfalls at each stage of growth and propose commensurate ways of minimizing risk. For example, tech startups whose business model relies on independent contractors—businesses that, like Uber, rely on the gig economy—should engage in a sophisticated classification analysis even at an early stage to ensure their model is viable in the long term. By contrast, tech startups whose workforce consists primarily of full-time employees can avoid that kind of analysis without greatly increasing their risk. Or, as another illustration, advanced tech startups should have sophisticated record-keeping mechanisms, while young companies will likely be able to use simple record-keeping processes without exposing themselves to much liability.

In other words, in terms of compliance plans, one size does not fit all. But without adequate planning, no business is immune from serious trouble.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Nilan Johnson Lewis PA | Attorney Advertising

Written by:

Nilan Johnson Lewis PA
Contact
more
less

Nilan Johnson Lewis PA on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.