An Uber driver in California is an employee of the ride-hailing service, not a contractor, the California Labor Commissioner ruled -- a decision that has symbolic significance for current legal battles but is limited in scope, attorneys say.
Because Uber is "involved in every aspect of the operations," this driver did not have enough work freedom to be considered an independent contractor, according to the ruling, which was made June 3 and surfaced Tuesday when Uber appealed it in San Francisco Superior Court. A labor commissioner had ruled that Uber owes the driver, Barbara Berwick, $4,152.20 in business expenses for the two months that she worked as a driver last year.
Uber is facing several legal challenges to its contractor-based business model, which is squarely built on the company's insistence that it is simply a matchmaker between riders and drivers, not a transportation service. When its drivers are independent contractors, the company is not responsible for any of the costs the drivers incur while working for them -- gas, car maintenance -- or employee benefits like health insurance and vacation time.
Uber holds itself "as nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation," the commission wrote. But Uber has far too much control over the everyday details of a driver's job for drivers to be considered independent contractors, they said.
Uber sets prices for each fare, discourages drivers from taking tips, vets all drivers, fires ones that have a rating of below around 4.6 out of 5 stars, and has specific requirements about what kind of car drivers can use, the commission said. Those factors were enough to convince them that Berwick was an employee of Uber.
In a statement, an Uber spokewsoman emphasized that the ruling is non-binding (which means later decisions are not required to agree with it), that it applies only to the driver plaintiff and that drivers have the ability to work for other companies like rival ride-hailing service Lyft.
"It’s important to remember that the number one reason drivers choose to use Uber is because they have complete flexibility and control," she said. "The majority of them can and do choose to earn their living from multiple sources, including other ride sharing companies."
The spokeswoman also emphasized that the same commission concluded in 2012 that a driver was a contractor, not an employee.
The decision sounds broad, but it is limited in scope and is "such a low-level process" right now, said start-up lawyer George Grellas. The Labor Commissioner's decision is more of an administrative one than a judicial one, and other courts are under no obligation to follow the decision, Grellas said. Uber appealed the decision, which moves the case to the San Francisco Superior Court. If the case ever moves up from there to the California Courts of Appeal, then a decision at that level could set some binding precedent, but not before, Grellas said.
"It's a throwaway type forum," Grellas told FORBES. "Once it's appealed, which of course Uber has already done, then the ruling itself has zero significant on even future proceedings in that same matter. Maybe it'll have significance in some kind of social way, like people around the nation will see it. But legally it's basically a ruling that is disposable, so to speak."
But higher courts sometimes defer to the decisions of government agencies because they are the people enforcing the law, said Shannon Liss-Riordan, an attorney who is currently suing both Uber and Lyft on behalf of drivers seeking to be employees.
"It could be very helpful for our case," she said. "The specific ruling pertained to one driver but the reasoning that the labor commissioner used was more broadly applicable."
Tuesday's ruling is just about one driver, but it is not the first time a government agency has viewed Uber drivers as employees. A Florida Uber driver filed for unemployment benefits after being deactivated and in May, the Florida Department of Economic Opportunity ruled that he was an employee and should have been owed unemployment benefits.
Judges have also recently ruled against Uber's contractor business model in other ways. In a case that is seeking class-action status, a judge denied Uber's motion to have the drivers deemed contractors and sent the case to a jury. A similar case against Lyft will also be decided by jury trial. The court also denied Uber and Lyft's attempts to require drivers to resolve cases in closed arbitration.
Drivers themselves may not want to be employees, especially those that work only a few hours a week. In a recent survey of 201 on-demand workers for companies like Uber, Lyft and Postmates, two-thirds of workers said they wanted to be classified as independent contractors. The survey, done by driver analytics tool SherpaShare, was mostly of Uber and Lyft drivers -- 86% of respondents.
Many of the respondents who wanted to be considered employees cited Uber and Lyft's strict rules about how often drivers have to accept rides as well as their policy of firing drivers who don't accept 90% of rides or whose ratings drop too low. Drivers who thought of themselves as contractors, however, said they valued the ability to set their own hours above any other kind of benefit that might come with employee status.
"Both companies (Lyft and Uber) use deactivation threats to control drivers," one survey respondent said. Others said they wouldn't even work for the companies if they were employees and could have schedules set for them. "I drive when I want, for as long as I want," another wrote.
