Uber Drivers: Employees, Contractors, or Neither?
The California Labor Commissioner recently ruled that Uber drivers are employees, and if this ruling holds up it will send shock waves through the so-called "sharing economy." If Uber drivers are employees, then Uber – and other companies that operate in the industry – could owe huge amounts of money in back-pay, interest, and penalties.
But many are asking: Do traditional definitions of employee or independent contractor even apply in a model of work where people pick up gigs on their phones? Or does the law need to evolve to create a new category of worker altogether?
(Photo credit Julie Glassberg/The New York Times)
A New Category of Worker
In a recent order in the pending class action against Lyft, Judge Vincent Chhabria suggested that a new category of worker might be appropriate for ride sharing companies:
The test the California courts have developed over the 20th Century for classifying workers isn't very helpful in addressing this 21st Century problem . . . Perhaps Lyft drivers who work more than a certain number of hours should be employees while the others should be independent contractors. Or perhaps Lyft drivers should be considered a new category of worker altogether, requiring a different set of protections.
Cotter v. Lyft, Inc., 19 Case No. 13-cv-04065-VC (N.D. Cal. Mar 11, 2015) (emphasis added). He conceded, however, that "absent legislative intervention, California's outmoded test for classifying workers will apply in cases like this," and "because the test provides nothing remotely close to a clear answer, it will often be for juries to decide." (Id.)
Casetext contributor, ERISA attorney Steven Rosenberg, posited that there may have to be an "evolutionary movement in the case law" that will "incorporate these types of sharing economy worker bees into the system somewhere in a middle ground, and there may have to likewise be a similar movement in statutory provisions that control access to and administration of 401(k) plans, disability benefits and the like for these purposes."(Do You "Work For" Uber? )
Applying the Traditional Standard
Others do not believe a separate category of worker is necessary. Stanford Professor and former Chairman of the National Labor Relations Board, William Gould, said in an interview with Casetext that he is not an advocate of a third category. He pointed out that the ruling by the California Labor Commissioner, Uber Technologies v. Berwick, is "the first application of the traditionally well-respected standard for determining whether drivers are employees."
Professor Gould concluded that, "based upon the analysis of the evidence, [the Labor Commissioner Decision that Uber drivers are employees] seems to be a very well-reasoned decision and comports with the way in which recent cases, such as Alexander v. Fedex Ground Package Sys., Inc., 765 F.3d 981 (9th Cir. 2014), have been decided." He added, "if the facts are as the Commissioner has related them in the ruling, it is hard to see how this would come down another way."
Uber Technologies v. Berwick applied the standard for determining whether an employment relationship exists as set forth by the California Supreme Court in S.G. Borello Sons v. Department of Industrial Rel, 48 Cal.3d 341 (Cal. 1989), which is a highly fact-intensive, multi-factor test. Professor Gould observed that this multi-criteria standard is "always difficult to apply," but it comes down to whether the drivers "have the characteristics that give them normal labor law protections as employees or do they have sufficient autonomy or ability to reap entrepreneurial benefits."
(Photo credit, Reuters)
Uber has appealed the Labor Commissioner ruling, and there is a lot at stake on top of the various financial obligations associated with paying employee benefits and overtime.
As employment lawyer Angel Castillo explained, a "negative ruling could also expose Uber to sanctions underCalifornia Senate Bill 459 of 2011, now part of the state’s Labor Code,which prohibits the willful misclassification of individuals as independentcontractors and allows civil penalties of between $5,000 and $25,000 perviolation." (Uber's Drivers Look, Swim and Quack Like Employees).
Should there be a separate category of workers Uber and Lyft Drivers, as Judge Chhabria alluded to in Cotter v. Lyft, Inc., 19 Case No. 13-cv-04065-VC (N.D. Cal. Mar 11, 2015)? If so, what would this category of workers look like?
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