California Uber Driver An Employee, Not Independent Contractor, State Regulator Rules

Uber has lost a crucial appeal in California, with the state’s Employment Development Department (EDD) ruling that a former driver was an employee of the company, rather than an independent contractor.

While the decision only applies to one former driver, it should send shockwaves through Uber and other “sharing economy” companies, who’ve long held they don’t employ the people using their apps.

Uber Drivers Win Another Legal Battle 

The driver, whose identity has not been released to the public, applied for unemployment benefits in 2014, Reuters reports. After the EDD decided that the driver was an employee of Uber, and thus entitled to those benefits, the company appealed the decision, first in late-2014 and for a second time in June 2015.

With its second appeal unsuccessful, the company is likely to face a host of lawsuits from other drivers in the near future.

Uber’s appeal was denied in August of 2015. The EDD’s ruling surfaced after an attorney, currently representing Uber drivers in other cases against the company, published court documents on her website.

Does Uber Employ Its Drivers?

Uber, a San Francisco company, relies heavily on classifying drivers as independent contractors, since the designation exempts the company from paying for health insurance and other benefits.

Uber has always said that it is solely in the “technology” business. By its own lights, the company offers an app, a sophisticated bit of software, and nothing more. Uber drivers, for their part, are simply people with cars, who use the app to connect with customers, and should thus be considered “independent contractors.”

But actual drivers have taken issue with that characterization, and now a number of regulatory authorities have agreed with them. California’s labor commissioner, as well as courts in Illinois, Indiana, Pennsylvania, Georgia, New York, Texas and Colorado have all deemed Uber driver’s true “employees.”

Some of those decisions hold true only for a single driver, instead of applying to every Uber driver within the state. Uber contends that there is no “typical” driver; people using the app to work do so on their own terms, choosing when to drive and how much.

Is Uber Misclassifying Thousands Of Drivers?

Uber, however, controls “every aspect” of a driver’s working life, setting fares, banning drivers from picking up passengers who don’t use the app and retaining the right to deactivate drivers’ accounts at will, according to the judge who heard Uber’s first appeal in the case.

All of which, in the eyes of California’s Employment Development Department, means a true “employer / employee relationship” exists between Uber and its drivers.

The distinction rests on whether or not a worker has true economic independence. Workers who are actually in business for themselves can be considered independent contractors, but once a worker becomes economically dependent on a company, they’ve become its “employee.”

With the recent certification of an Uber class action in California, allowing a likely 130,000 drivers to pursue legal action, the ride-sharing company may well be headed towards years of litigation.

Other upstarts in the sharing company like Lyft and Caviar, who lean on business models similar to Uber’s, have also been hit by lawsuits.