Huge ruling may have a ripple effect
In California, a former Uber driver has been awarded unemployment benefits, as the Employment Development Department has ruled that drivers are employees, even though Uber wants to characterize them as independent contractors.
Uber and several Uber-style copycat startups have faced legal disputes over whether their hires should be classified as independent contractors or regular employees – a distinction that effects workers’ rights and benefits. Earlier this summer we wrote about the downfall of Homejoy, a startup that, like Uber, used mobile apps to connect customers with service providers, in this case, house cleaners. The company closed its doors after a lawsuit ruled that its house cleaners were employees, not independent contractors. Startups Postmates and Try Caviar have both faced similar legal issues.
A former driver was awarded unemployment benefits back in April 2014
Uber appealed the decision, in November and again the following June. An administrative judge, and then the California Unemployment Insurance Appeals Board both ruled in favor of the driver. This isn’t the first time drivers were designated as employees, but it is the first time that Uber’s appeals have been denied. Although an Uber spokeswoman claims that the decision “does not have any wider impact or set any formal or binding precedent,” legal experts believe this recent case will lay the groundwork for future Uber drivers hoping to be classified as employees.
What makes an Uber driver and employee rather than an independent contractor? The company sets fares for drivers, and charges them a fee if they decline to pick up a ride. The company also prevents drivers from negotiating rides with riders not using the app, and has the prerogative to suspend or deactivate drivers’ accounts. All of these factors have led California to assert that Uber drivers are employees. Nonetheless, Georgia, Pennsylvania, Colorado, Indiana, Texas, New York, and Illinois all classify Uber drivers as independent contractors.
As more and more startups attempt to emulate Uber’s model, they will have to decide carefully about whether they are hiring employees or independent contractors.