Uber has lost another legal round in the dispute over whether its drivers are independent contractors or employees, an issue that threatens the core of the ride-hailing company's business model.
The California Employment Development Department (EDD) determined that a former Uber driver in Southern California was an employee, not an independent contractor as the company has claimed, and the decision was upheld twice after Uber appealed by both an administrative law judge and the California Unemployment Insurance Appeals Board.
The board's ruling came from its Inglewood office in August. The case came to light when a lawyer suing Uber on behalf of other drivers posted documents to her website.
The EDD decision is the third such ruling that appears to undercut how San Francisco-based Uber operates, relying on independent contractors to transport passengers.
The other two were by a Florida regulatory agency in May and the California Labor Commissioner in June.
More significantly, this is the first of those cases to be appealed and have those appeals denied, foreshadowing how other appeals may be handled, some legal experts say.
In the Inglewood case, a former Uber driver, whose name was withheld from case documents, applied for unemployment benefits in April 2014.
After the EDD determined the driver had rights to unemployment benefits as an Uber employee, the company appealed the decision first in November and again in June, according to the EDD.
According to the administrative law judge who heard the first appeal, Uber has sole discretion over fares, and can charge drivers a cancellation fee if they choose not to take a ride, prohibit drivers from picking up passengers not using the app and suspend or deactivate drivers' accounts.
Based on that, “there was in fact an employer/employee relationship,” according to the decision.
The company argues that drivers want independent contractor status because they value the chance to be their own boss.
The decision, an Uber spokeswoman said, “does not have any wider impact or set any formal or binding precedent.”
Eight states have issued rulings that classify Uber drivers as independent contractors: Georgia, Pennsylvania, Colorado, Indiana, Texas, New York, Illinois, and California, which made such a ruling in 2012 that applied to only a specific case.
But a federal judge in San Francisco ruled last week that drivers are entitled to class-action status in litigation over whether they are independent contractors or employees