The California Labor Commission’s recent ruling could upend not just Uber’s business model but also others like it hoping to cash in on the sharing economy.
by Elyse Samuels
June 25, 2015
Uber Technologies Inc. is currently fighting to keep its status as a facilitator of independent contractors instead of an employer.
This difference is vitally important to Uber, which is valued at roughly $50 billion. Uber has already faced some heat in the public eye regarding driver background checks, unlicensed drivers and cabdriver protests. Now the popular ride-hailing service operating in 300 cities and more than six continents is now under scrutiny thanks to a recent lawsuit in California, where the company is based.
Last week, the California Labor Commissioner’s Office declared an Uber driver should be classified as an employee, not an independent contractor. The case ruled Barbara Ann Berwick receive nearly $4,200 in expenses and other costs during her eight-month stint as an Uber driver. Uber is planning to appeal.
Why does this matter? Uber’s status as a contractor allows it to minimize costs and keep control over drivers at the same time. This type of control resembles an employer-employee relationship, the California Labor Commission ruled, which should include benefits, stable pay and job security. None of these are currently offered with Uber.
With such high stakes, everyone is sharing what they have to say on the Internet. Commenters vary among Uber drivers, HR professionals, the common citizen and everyone else in between. Most are in support of the ruling. Several comments present an outcry of injustice at Uber’s audacity to take advantage of workers by calling them independent contractors instead of employees. Popular opinion is that Uber has been skating by operating under a business model that is unsustainable, since it is operating while avoiding the typical costs employers incur.
In the real world, it’s impossible to make large profits, face very little liability and avoid regulation or employee unionization. To that end, the California Labor Commissioner Office’s ruling could have wider implications.
This ruling not only matters for Uber but also introduces implications for similar tech companies such as ride-hailing service Lyft and grocery-shopping app Instacart. With this new court decision, Uber could start a domino effect.
As of now, however, we'll have to wait and see how other court cases involving Uber in California play out. Reuel Schiller, a law professor at the University of California Hastings College of Law, told The Wall Street Journal that rulings by state agencies, such as the California Labor Comission, "don't set a formal precedent for court cases or other actions."
Should other federal or state agencies declare Uber an employer, the Journal report said, it would have a lot of positive momentum for drivers looking to cash in.
What do you think? Should Uber be considered an employer?
