A driver who filed a complaint againstUber Technologies was an employee of the ride-hailing company, not an independent contractor, the California Labor Commission ruled this week.
The driver, Barbara Berwick, was awarded a mere $4,152, which is chump change for Uber. But the technology giant is appealing the ruling because it could significantly increase the $40 billion startup's costs.
Uber currently saddles its drivers with major vehicle costs, including the vehicle itself, maintenance, insurance and gas, by labeling its drivers independent contractors rather than employees. If Uber is forced to treat drivers as employees, it could bear a greater share of those costs, which will eat into its profits.
Uber currently holds itself out as "nothing more than a neutral technology platform," noted the California Labor Commission in the ruling. In reality, Uber maintains a good deal of control over its drivers, including the fares they can charge, the model of cars they drive, and, to some extent, how often they work, the commission noted.
Uber also does not allow drivers to negotiate their percentage of the fare, which is set at around 20%, thus controlling their wages, the commission said.
"In light of the above, Plaintiff was Defendants' employee," the commission ruled.
Uber officials did not immediately return a request for comment. The San Francisco startup is appealing the ruling, according to documents filed with California state court in San Francisco, where the appeal will take place.1
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Reporters were quick to magnify the scope of the ruling: “If Uber drivers are employees, that opens Uber up to higher costs, including Social Security, workers’ compensation and unemployment insurance,” wrote the Guardian. “That could affect its valuation, currently above $40 billion, and the valuation of other companies that rely on large networks of individuals to provide rides, clean houses and other services.”
Actually, the ruling does not apply to all the tens of thousands of Uber drivers working across California (Los Angeles and San Francisco drivers combined total at least 35,000). It is only applicable to Barbara Ann Berwick, the single defendant in the lawsuit. And it could fall apart if Uber’s appeal succeeds.The company is not about to begin doling out thousands of health insurance cards, nor is it about to commit to the strict regulations of California’s taxi industry.
Still, Berwick’s re-classification as an employee, with the distinct rights that accompany that designation, is a significant step for workers who lack the protections of full-time employment.2