California Regulators Rule Uber Drivers Are Employees, Not Contractors

According to a California Labor Commissioner’s decision, Uber drivers are employees not contractors, as the start-up currently claims. If the ruling stands, the costs of the smartphone app-based ride hailing service could go up.

Moreover, Uber’s rivals and other app-based services such as the professional house cleaning service Homejoy and task outsourcing start-up TaskRabbit could be affected, as well.

But Uber insists that the commissioner’s decision applies to only one of its drivers. The company filed an appeal with a state court in San Francisco against the driver on Tuesday. That’s how the commissioner’s ruling from June 3 became public.

Uber doesn’t want its drivers to be considered employees under the state law because that would trigger higher expenses for the company, including benefits, Social Security, and unemployment insurance.

And raising costs may negatively impact its valuation, which currently stands above $40 billion. Other businesses that directly rely on large crowds for their profits may also be affected.

But due to the appeal it had filed, Uber is not forced to consider drivers employees for the moment. The company argues before state court, that five other states ruled that its drivers are independent contractors.

Additionally, three years ago the same commissioner in California ruled that one of the Uber drivers was a contractor because he could freely choose his work hours.

But this month, the commissioner changed his mind because he took into account additional factors, while authorities learned that the company is “involved in every aspect of the operation.”

Uber, on the other hand, claims that drivers are autonomous.

“The number one reason drivers choose to use Uber is because they have complete flexibility and control,”

a Uber representative said.

The company also disclosed that most of its drivers make money from “multiple sources,” including rival companies including Lyft. And Uber hadn’t changed its stance on this since its beginning.

However, the California labor commissioner found that the company does control every aspect of the operation because it monitors the instruments drivers use, keeps an eye on their approval ratings and decline access to the system if those ratings fall below a certain threshold.

Though the decision will apply only to the California market, the state is Uber’s home base. Also, it may inspire other states to issue similar decisions when dealing with Uber. In Florida, regulators also ruled that Uber drivers are employees earlier this year.

Some experts claim that if more states qualify Uber drivers as employees, Congress may have to draft a new law or the Supreme Court may also step in.

Image Source: Slate