Labor ruling puts dent in Uber’s ‘independent’ taxi model

The app-based ride company Uber has been in the courts nearly as long as its cars have been on the streets. In the process of expanding to cities across the United States and around the world, the $50 billion, Bay Area–based corporation has faced dozens of lawsuits over drivers’ compensation, discrimination against passengers with disabilities, unemployment pay and commercial insurance. On Tuesday it appealed a significant loss: a ruling from California’s labor commissioner declaring that one so-called driver partner is not an independent contractor or small business owner but an employee.

On June 3 the California commission awarded $4,152.20 to Barbara Berwick, an Uber driver alleging uncompensated expenses and unpaid wages. (The decision became public Tuesday when counsel for Uber in San Francisco, the law firm Littler Mendelson, appealed the ruling in Superior Court.) 

While the facts of the case are rather convoluted — Berwick established a corporation in order to drive for the company and failed to produce records of her hours and compensation — the administrative decision does a careful analysis of the factors governing employer-employee status. It cites the mega-app’s control over driver working conditions (background checks, a rating process), its provision of tools (the ubiquitous dashboard iPhone) and a payment system, among other factors, to hold Uber responsible for equipment fees, hourly wages and overtime under California law. This follows a May decision from Florida ruling that an Uber driver was an employee entitled to unemployment compensation.

An Uber spokeswoman downplayed the California decision as “nonbinding and appl[ying] to a single driver” in a written statement, which read, “It 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 have also come to the same conclusion.”

A former Uber driver, who requested anonymity for fear of retaliation, said the ruling touches on important issues but that workers don’t necessarily want to be employees. “They want to be independent contractors, but they want a say in their work. They don’t want to have to check in, preschedule … and Uber is taking a bigger and bigger chunk of what used to be their paycheck.” According to one analysis, the average Uber driver nets just over $7 per hour.

Whatever the result of Uber’s appeal, the company’s home state will continue to be the de facto trailblazer in regulating this new form of ground transportation. Since Uber’s launch in 2010, California’s cities and counties, followed by the state itself, have granted app-based drivers entry into their taxi markets, then taken steps back as disputes emerged. The same has been true in other states, including Texas, where cities initially welcoming of Uber later raised concerns over background checks and licensing.

Key questions remain unsettled: Are Uber drivers more like traditional cabbies — in recent decades, almost universally considered independent contractors — or more like the employees of black car limo companies, thus entitled to minimum wages, unemployment pay, the right to unionize, freedom from discrimination and other safeguards of state and federal employment laws? Should Uber drivers hold commercial insurance and commercial driver’s licenses? Must they be wheelchair accessible?

Perhaps the highest-profile Uber litigation is an ongoing wage-and-hour class action suit in federal court in San Francisco. It would cover much the same legal ground (PDF) as the decision made public this week — employee or independent contractor? — though with grander implications.

“The issue of misclassification of workers is widely recognized to be a significant problem affecting workers in the United States,” said Sameer Ashar, a law professor at the University of California at Irvine. He and his students are representing two port truck drivers before the same labor commission that decided this month’s Uber case, “arguing that they were actually employees, not independent contractors and thus had the right to back wages, overtime and reimbursement for truck maintenance.”

Ashar explained that “employee” is a long-contested label: “The garment sector is the classic case of manufacturers, retailers and brands avoiding liability. Uber fits into that, and so does the warehouse and trucking industry.”

As with fast food’s Fight for $15 campaign, lawsuits over employee status may be the first step in a longer-term strategy of unionization. If the National Labor Relations Board and a critical mass of federal courts hold that Uber drivers — or, for that matter, traditional taxi drivers — are employees, formal worker organizing could be possible.

“Uber has underestimated drivers’ ability to organize themselves and to find ways of being protected,” said Bhairavi Desai, the leader of the National Taxi Workers Alliance, an informal union affiliated with the AFL-CIO labor federation. “In New York City, the machinists have [unionized] a percentage of the black-car drivers. The [California ruling] says that workers, whether they’re organized or not, should be economically protected by overreach from the corporation. That’s huge.”