The California Labor Commission ruled recently that drivers who work for the ride-finder app Uber are technically employees, not independent contractors as the company has claimed. Uber has stated that its app merely connects drivers with passengers, that it is more of a middleman, rather than manager. However, the ruling cited many instances where Uber operated as an employer, such as its policy of giving its drivers phones to use on the job, setting their rates, as well as its policy of disconnecting drivers from the app who have not been active for 180 days.
The ruling ordered Uber to pay Barbara Ann Berwick, a driver who worked for the company for eight weeks, a total of $4,152.20 for unpaid expenses related to the costs of owning and maintaining a car, including gas. The results of the ruling do not apply beyond Berwick's case, and Uber has appealed the decision. The company is already embroiled in many similar lawsuits across the country in as many as five other states. In May, A Florida court ruled that Uber drivers may be classified as employees in order to collect unemployment. Uber is appealing that decision as well. In California, a class-action lawsuit may be mounting as labor rights activists, and other drivers, begin to organize.
What It Means for the Sharing Economy
Uber and other service apps like Instacart exist in a virtual marketplace, where deals often connect citizens to other citizens. From the tech CEO's perspective, contractors who work for apps like these enjoy flexibility and freedom--the ability to take a vacation whenever, for example, without having to ask permission. But labor activists say that the lack of stability is more harmful to workers, who sacrifice their access to benefits like healthcare and workers' compensation in the event of injury, as well as, as already noted, the ability to collect unemployment in the event of sudden termination.
"For anybody who has to pay the bills and has a family, having no labor protections and no job security is at best a mixed blessing," said Robert Reich, former secretary of labor and a professor of public policy at the University of California, Berkeley, as reported by the New York Times. "At worst, it is a nightmare. Obviously some workers prefer to be independent contractors - but mostly they take these jobs because they cannot find better ones."
Shannon Liss-Riordan, a Boston-based attorney who has a class-action case pending against Uber in California federal court, says that Uber has saved millions of dollars by shifting the financial burden of owning and operating a business to its drivers. "Uber's a $50-billion company," she says. "I think it can afford to bear the responsibilities of an employer."
If the case escalates, Uber and other sharing apps will likely face restructuring. The question is, will they give contractors greater freedom (the ability to set their own rates, for example?), or will they cough up the benefits that are due? It's literally a million dollar question. Fed Ex, for example, recently paid $228 million to settle claims from 2,000 drivers who said they were mislabeled as independent contractors.
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