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California Labor Commission Says Uber Driver is an Employee, Not a Contractor

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Jun 17, 2015

In a decision that has potentially far-reaching implications, the California Labor Commission ruled that a driver for Uber is an employee and not a contractor. Uber is appealing.

The June 3 decision, which came to light Tuesday when Uber filed an appeal in state court, stemmed from a dispute between Uber and one of its drivers who claimed expenses from the ride-sharing startup. After an administrative judge ruled in her favor, declaring her an employee, Uber appealed to the state Commissioner’s office. The decision upheld the initial ruling.

“The defendants (Uber) hold themselves out as nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation,” said the decision. “The reality, however, is that defendants are involved in every aspect of the operation.”

Uber says driver is not a “bona fide employee”

Uber, and its competitor Lyft, consider the drivers to be independent contractors since they make their own hours, set their own schedules and determine how much they want to work. However, two federal class action cases have been filed by drivers against both companies.

Uber logoThe drivers say flexibility in work schedules is the only independence they have and that the companies set fares, conduct background checks, require the use of company apps, and set rules about the age of individual vehicles and cleanliness. Uber also discourages tipping.

These are the types of control issues that lead the Labor Commission to find Uber was involved in “every aspect of the operation.”

In a statement, Uber said the ruling “is contrary to a previous ruling by the same commission, which concluded in 2012 that the driver ‘performed services as an independent contractor, and not as a bona fide employee’.” Five other states, Uber said, have held drivers to be contractors.

The company also noted that decision applies only to the single driver involved in the dispute.

Classification of workers becoming a major issue

While that is technically true, the decision is a red flag for other sharing services, especially in light of other decisions both in California and elsewhere.

Earlier this year, A Florida state agency said Uber drivers were employees. In another California classification case, FedEx disclosed just the other day it will pay $228 million to settle a lawsuit by California-based FedEx Ground Package drivers. FedEx essentially lost the case last summer when the Federal Appeals Court said the 2,300 or so drivers in that class action were employees.

The classification of workers in a “sharing” economy is becoming a major issue as the practice moves from ride-sharing services into other areas.

Home house cleaning and handyman service middleman Handy.com is being sued by two sisters who are seeking class action status for their classification suit. Crowdflower is attempting to finalize a settlement with some 20,000 of its workers over their claims of misclassification and failure to pay at least minimum wage.

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