Uber’s Defense of Its Misclassification of Uber Drivers Crashes at the California Labor Commissioner’s Office

By Owen H. Laird

Earlier this month, the California Labor Commissioner ruled that an Uber driver is not an independent contractor but an employee. Uber—a popular driver sourcing company formally known as Uber Technologies Inc.—classifies its drivers as independent contractors and not employees, allowing Uber to avoid reimbursing its drivers for costs and expenses, compensating its drivers for overtime worked, and paying a variety of payroll and employment taxes.

To determine if a worker is an employer or independent contractor, California law considers several factors, including the control the employer has over its workers, the degree to which the work is part of the employer’s regular business, and the kind and degree of specialization the occupation requires. The Commissioner’s analysis of the relationship between Uber and its drivers found that Uber controlled the operation as a whole, vetted drivers, and maintained the necessary technology to conduct the business. The Commission also found that the drivers were an integral part of the Uber’s business and their work did not require specialized skills. Those facts supported the conclusion that the drivers were employees, not independent contractors.

The driver that filed the complaint with the Commissioner, Barbara Ann Berwick, claimed that she was misclassified as an independent contractor and so sought reimbursements for uncompensated expenses, such as tolls, and her lost minimum wage and overtime payment. The Commissioner determined that Uber indeed owed her such reimbursements, but her wage claims failed because she had no evidence of her hours worked; however, if Uber’s drivers are considered employees, then they are still entitled to the minimum wage and overtime.

Even though this decision is limited to California and only the first step in a lengthy legal process—Uber has already appealed this decision to the Superior Court of California—the question of whether the drivers are independent contractors or employees is central to Uber’s business model. Because Uber has hundreds of thousands of drivers in most states and overseas and faces thousands of dollars of additional expenses for each driver using its service, the additional expenses mandated by this decision could cripple the young company, especially if more jurisdictions adopt its conclusion. Although California’s labor laws are generally more worker-friendly than many other states’, Uber must address the real threat of similar complaints in other jurisdictions resulting in its drivers’ reclassification as employees.

The worker-classification issue is not just limited to Uber; not only are similar companies, such as Lyft, dealing with the same issues, but many start-up companies that aim to connect workers with customers by providing services through new-economy sourcing services must determine how to classify the individuals who work through its service.

If you believe that you have been misclassified as an independent contractor, contact The Harman Firm, LLP.