California Labor Commissioner Rules Uber Driver is Employee, Not Independent Contractor | Practical Law

California Labor Commissioner Rules Uber Driver is Employee, Not Independent Contractor | Practical Law

The California Labor Commissioner's Office issued a decision finding that a driver for Uber, the transportation service that allows passengers to hail a ride using their smartphones, should have been treated as an employee, not as an independent contractor. The decision applies only to the driver who brought the action and has no precedential effect, but is a notable outlier in this new and growing area of the economy. Uber has already appealed the decision to the California Court of Appeal.

California Labor Commissioner Rules Uber Driver is Employee, Not Independent Contractor

by Practical Law Labor & Employment
Published on 22 Jun 2015 • California
The California Labor Commissioner's Office issued a decision finding that a driver for Uber, the transportation service that allows passengers to hail a ride using their smartphones, should have been treated as an employee, not as an independent contractor. The decision applies only to the driver who brought the action and has no precedential effect, but is a notable outlier in this new and growing area of the economy. Uber has already appealed the decision to the California Court of Appeal.
The California Labor Commissioner's Office issued a decision finding that a driver for Uber, the transportation service that allows passengers to hail a ride using their smartphones, should have been treated as an employee, not as an independent contractor. The decision applies only to the driver who brought the action and has no precedential effect, but is a notable outlier in this new and growing area of the economy. Uber has appealed the decision to the California Court of Appeal.

Background

Barbara Ann Berwick worked as a driver for Uber Technologies, Inc. (Uber) from July 2014 to September 2014. Berwick signed a written agreement with Uber that entitled her to accept or reject customer requests for service and to set her own work hours, but also required her, among other things, to:
  • Perform her work in accordance with Uber's specifications.
  • Maintain a vehicle that was no more than ten years old.
  • Maintain a specific minimum amount of liability insurance.
  • Receive an agreed-upon service fee for her work.
When a dispute arose between Berwick and Uber regarding the manner in which Berwick was being paid, Berwick stopped working for Uber and brought an action with the California Labor Commissioner's Office seeking unpaid wages and reimbursement of her work-related expenses. A hearing was held before a hearing officer. Uber claimed Berwick was an independent contractor and not due any wages or expense reimbursement.

Outcome

The California Labor Commissioner's Office decided that Berwick was Uber's employee, not an independent contractor, and awarded her $4,152.20 in expenses and other costs for the nearly two-month period she worked for Uber. The hearing officer held that:
  • Uber is involved in every aspect of its operation and is more than a neutral party (or "technological platform") connecting customers with drivers.
  • Uber exercises significant control over its drivers, including:
    • vetting drivers, including conducting background and DMV checks;
    • monitoring drivers' customer approval ratings and terminating drivers if their customer approval ratings fall below a certain level;
    • setting a non-negotiable service fee that drivers receive;
    • encouraging drivers not to accept customer tips from customers; and
    • requiring that drivers register their vehicles with Uber and that their vehicles are no more than ten years old.
  • Uber's intellectual property enabled Berwick to work for Uber and her work as a driver was closely tied to, and not distinct from, Uber's business (Yellow Cab Cooperative v. Workers Compensation Appeal Board, 226 Cal. App. 3d 1288 (1991)).

Practical Implications

The decision by the California Labor Commissioner's Office in Berwick stands apart from decisions in several other states finding that Uber's drivers were independent contractors. While the Berwick decision could influence other agencies and courts that address the issue, the decision applies only to Berwick for now and has no direct legal impact. However, courts can now look to this decision when evaluating the same and similar issues in this growing area of the "sharing" or "gig" economy. Uber has already appealed the decision to the California Court of Appeal. The decision on appeal will have far-reaching impact on employers in this industry.