In a decision that could have reverberating effects in the so-called “sharing economy,” the California Labor Commission recently ruled that a driver for Uber Technologies, Inc. is an employee and not an independent contractor.
Hearing Officer Stephanie Barrett’s decision, issued on June 3, 2015, ordered Uber to reimburse Barbara Ann Berwick more than $4,000 (including interest) for mileage and other expenses incurred during her stint as an Uber driver last year. Rejecting Uber’s argument that the company is “nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation,” the Commissioner held that Uber is “involved in every aspect of the operation” and exercises significant control over drivers. See Order, Decision or Award of the Labor Commissioner, Berwick v. Uber Technologies, Inc., Case No. 11-46739 (June 3, 2015) (available here). The ruling was made public after Uber filed an appeal to the Labor Commissioner’s order in the San Francisco County Superior Court (available here).
Applying the 11-factor test enumerated by the California Supreme Court in S. G. Borello & Sons, Inc. v. Dept. of Industrial Relations, 48 Cal. 3d 341 (1989), the Commissioner found that Uber retained “all necessary control over the operation as a whole,” which was an overriding factor that established the existence of an employee-employer relationship. See Order at 8. The Commissioner also emphasized that the work done by drivers was “an integral part of the regular business” of Uber and that “[w]ithout drivers such as [Berwick], [Uber’s] business would not exist.” Id.
Although the Berwick decision is purely administrative, it may have significant implications for Uber’s labor model, which continues to utilize independent contractors as drivers. Given the Commissioner’s findings that Uber is “in business to provide transportation services to passengers,” and that drivers for Uber do “the actual transporting of those passengers,” Order at 8, it appears that Uber’s primary arguments regarding its role as a “mere platform” rather than an employer will not succeed in any future litigation. Such findings will likely have a lasting impact on businesses providing passenger transportation services that use an independent contractor labor model.
The debate over employee classification is likely to escalate as the sharing economy continues to grow exponentially, with the majority of such companies classifying workers as independent contractors—exempt from many wage-and-hour laws and protections—rather than employees. So long as these companies continue to classify workers as independent contractors, they risk facing misclassification claims, a growing trend in class action litigation nationwide.
Suzy Lee, Associate
CAPSTONE LAW APC