Uber Driver Deemed Employee by California Regulator

I only post this because I tried doing the UBER thing.  Expenses, depreciation, and the small amount of fares make this a loser of a deal.  UBER is running a con on their operators and pays no taxes for unemployment, workmens’ compensation, or FICA.

SAN FRANCISCO — A determination from  California’s Labor Commissioner that an Uber driver is an employee could be a major blow to the San Francisco company as it fights to preserve a business model that relies on independent contractors.

Earlier this month, the office ruled that driver Barbara Berwick is entitled to $4,152 as reimbursement for money spent on gas and tolls while shuttling passengers for Uber Technologies Inc. The June 3 ruling became public Tuesday, when Uber appealed in San Francisco Superior Court.

A hearing officer found that Berwick met the legal definition of an employee, entitling her to reimbursement of business expenses.

“Plaintiff’s work was integral to defendants’ business,” hearing officer Stephanie Barrett wrote. “Defendants are in business to provide transportation services to passengers. Plaintiff did the actual transporting of those passengers. Without drivers such as plaintiff, defendants’ business would not exist.”

In an online statement, an Uber spokeswoman said the ruling does not extend beyond Berwick’s case.

“The California Labor Commission’s ruling is non-binding and applies to a single driver,” the spokeswoman wrote. “It’s important to remember that the number one reason drivers choose to use Uber is because they have complete flexibility and control.”

Though not legally binding as to other drivers, the ruling could have broader implications—most immediately in an employment case moving toward trial in the Northern District of California. In that case, California drivers claim they are entitled to employee benefits such as expense reimbursement, minimum wage and overtime pay. Uber’s lawyers insist it is a technology company that makes an app to connect independent drivers and passengers, not a car service that employees drivers.

The hearing officer disagreed.

“The reality, however, is that defendants are involved in every aspect of the operation,” she wrote. “Defendants vet prospective drivers, who must provide to defendants their personal banking and residence information, as well as their Social Security number. Drivers cannot use defendants’ application unless they pass defendants’ background and DMV checks.”

While drivers supply their own cars, the hearing officer pointed out drivers must register their cars with the company and can’t drive cars more than 10 years old. Drivers are discouraged from accepting tips, and cannot negotiate their own fees.

Uber is represented in its appeal by Littler Mendelson shareholder Andrew Spurchise. He did not respond to requests for comment Wednesday. Gibson, Dunn & Crutcher partner Theodore Boutrous Jr. represents Uber in the employment class action brought by drivers in the Northern District of California.

Boston attorney Shannon Liss-Riordan, who represents Uber drivers in that case, praised the Labor Commissioner’s ruling but said it remains to be seen what it will mean for her clients.

“I think Uber’s defense is kind of crumbling in the face of closer scrutiny,” she said. “This is just another example.”

Liss-Riordan said she may use the ruling as ammunition in her bid for class certification, which is scheduled to be heard in August before U.S. District Judge Edward Chen. Or if he grants her motion, she may use the ruling in a motion for summary judgment.

Chen doesn’t have to defer to the Labor Commissioner’s ruling, nor do individual  hearing officers with the larger Department of Industrial Relations have to defer to one another. For example, in 2012, a hearing officer ruled Uber driver Rashid Alatraqchi was an independent contractor, not an employee. The hearing officer determined Uber is a technology company, not a transportation provider, and the services Alatraqchi provided were not part of Uber’s business.

“Plaintiff set his own hours, and controlled the manner in which he completed the job,” the hearing officer wrote. “Defendant did not supervise or direct his work and only paid him when plaintiff invoiced defendant.”

Uber’s lawyers tried to use that decision to their benefit in the pending California employment case, but Judge Chen wasn’t persuaded.

“Uber cites no case law suggesting this court owes the hearing officer’s conclusion any deference,” Chen wrote, “and his conclusion appears to warrant none. On the merits, the decision (which contains only one paragraph of analysis) is plainly wrong.”

Michelman & Robinson partner Spencer Hamer, who represents employers in labor disputes, said the recent ruling from the Office of the Labor Commissioner is huge for plaintiffs lawyers going after Uber.

“It’s going to embolden them,” Hamer said. “They’re going to definitely factor it into their settlement valuation. And it’s going to just encourage more and more of these lawsuits, not only against Uber, but against other companies that have a similar business model.”

That could be trouble for businesses that make up Silicon Valley’s ballooning “sharing economy,” many of which use independent contractors to provide driving, delivery, cleaning and other services.

So far there are few substantive rulings that try to apply California’s old employee/contractor laws to these new business models, Hamer said, which means the Labor Commissioner’s ruling could set a new precedent.

But Uber also takes a risk in appealing the ruling, Hamer said. A decision in state court carries more weight than a regulator’s ruling, especially if the case makes its way up to the appellate court or California Supreme Court.

Contact the reporter at mkendall@alm.com.

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