Ride share drivers are employees

Uber drivers: employees or independent contractors?

Earlier this month a California agency that hears workplace disputes (Division of Labor Standards Enforcement, or Labor Commissioner) made a decision that could have a major impact on the sharing economy. An Uber driver sought reimbursement for expenses she incurred while working. Because the Labor Commissioner can only consider disputes between employers and employees, the agency had to determine whether the driver was an employee or an independent contractor.

The Labor Commissioner noted that a court in the worker’s compensation setting had previously decided in similar circumstances—drivers working for a taxi service—were employees. It then reviewed several factors to make the employee versus independent contractor determination.

First, the Labor Commissioner found that Uber had sufficient control over the driver’s activities because it provided her with passengers through its software application. Second, although the driver used her own vehicle, this was not enough to establish an independent contractor relationship given a prior court decision that pizza delivery drivers were employees.

Third, the Labor Commissioner noted that a key factor is whether the individual is carrying out work that is integral to the employer’s business. Uber is in the business of providing transportation services, and the driver’s job was to transport passengers: “[w]ithout drivers such as Plaintiff, [Uber]’s business would not exist.”

Fourth, the Labor Commissioner determined that Uber was involved in every aspect of the transportation service. Uber vets its prospective drivers through an application process and background check. Drivers must register their cars with Uber, and the company monitors the drivers’ ratings and reserves the right to stop providing software access if the ratings get too low. No one other than the drivers can use Uber’s software technology. Passengers pay Uber a set price, and Uber pays the driver a non-negotiable service fee. If a passenger cancels, Uber decides whether the driver will get a cancellation fee.

Fifth, the driver provided only her car and her labor. Uber provided the technology that allowed her to get passengers. As the Labor Commissioner put it, she could not carry out her work without the technology access. Finally, the driver did not bring any managerial skills that could create an opportunity for profit or loss.

After considering all these factors, the Labor Commissioner decided that the driver was an employee. As such, she was entitled to reimbursement for expenses she incurred while driving for Uber: mileage (at the IRS rate) plus tolls.

Uber has appealed this decision. As a result, the controversy is not settled. Look for future posts as this case makes its way through the appeal process.

Posted by deanroyerlaw