The California Labour Commission has ruled that Uber drivers are employees in what could prove to be a damaging blow to the ride-sharing app’s business model.
Uber currently treats its drivers like third-party contractors, but in response to a claim brought by San Francisco-based driver Barbara Ann Berwick, a state court in San Francisco has decided she is indeed an employee. As reported by Reuters, Uber is currently appealing a Labour Commissioner award of about US$4,000 in expenses to the driver.
Uber’s current model ensures it can operate without the responsibilities that would come with being a employer of drivers, like paying for their social security and medicare taxes in California. Equally, the ruling could have a negative impact on some drivers themselves, who treat their Uber gig as an informal side job.
The company’s home state continues to be a thorn in its side. In December, Los Angeles and San Francisco filed lawsuits accusing Uber of “making false or misleading statements to consumers and for engaging in a variety of business practices that violate California law”.
Updated 17 June 2015 at 8:44pm: Uber has released the following statement to Siliconrepublic.com
“Reuters’ original headline was not accurate. The California labour commission’s ruling is non-binding and applies to a single driver. Indeed 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. It’s important to remember that the number one reason drivers choose to use Uber is because they have complete flexibility and control. The majority of them can and do choose to earn their living from multiple sources, including other ride-sharing companies.”
That previous ruling refers to the August 2012 decision by the labour commission, which stated: “Defendant’s [Uber’s] business was engaged in technology and not the transportation industry… Defendant did not supervise or direct his work and paid him only when Plaintiff involved Defendant. Based on the testimonies and evidence presented, Plaintiff performed services as an independent contractor of Defendant, and not as a bona fide employee.”
Note this ruling involved an UberBlack driver, not an UberX driver.
San Francisco image via Shutterstock