You generally need a mechanical licence to publish a cover of a song. Most covers that people upload are infringing copyright by not having that licence. That's the law, no ifs or buts about it. But even then, Youtube's system is not designed to follow the law - it's designed to placate large publishers by giving them a huge amount of power. It puts the onus on anyone accused of copyright infringement and is designed to settle complaints as automatically as possible.