An Uber Problem in Employment Law

By: Alexis Wood

Uber is considered a safe way to get home from the bar after a night out with friends or convenient transportation to the airport. However, the popular ride-sharing company has recently become subject to class-action lawsuits arising out of one simple question: Are Uber drivers employees or independent contractors? Worker misclassification can have serious effects. “Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.”[1]

How to Classify Employees

Courts have delineated various methods for determining how to classify a worker. For example, according to the Ninth Circuit, “the degree of control which the alleged employer may or could exercise over the details of the service rendered to the business by the workers, the opportunities of the workers for profit or loss, their investment in the facilities for work, the permanency of the relation and the skill required are factors which are weighed in making the judicial determination of the relationship, but no one of these factors is controlling, nor are the courts precluded from giving consideration to other factors which bear logically upon the issue of the workers’ actual economic dependence upon the business of the alleged employer.”[2]

Generally, the more control a company has over the workers, the more likely those workers will be classified as employees. “Control” can come in a variety of ways and there are three general categories of “facts that provide evidence of the degree of control.”[3] First, Behavioral facts are facts that evidence the control the company has over its workers’ behavior.[4] Second, Financial facts demonstrate whether “the business aspects of the worker’s job [are] controlled by the payer.”[5] Finally, courts look at the type of relationship between the company and the worker—any contracts, employee-type benefits, etc.[6]

What Should Uber Drivers Be Considered?

On one hand, arguably the number one reason people become Uber drivers is the flexibility of schedule the company provides. With Uber, drivers do not have to have set hours. A driver could drive as often, for as long, as he chooses. This aspect seems to weigh in Uber’s favor because it makes its drivers look less like traditional employees. Another factor that weighs in Uber’s favor is that it has virtually no control over its drivers’ routes or territories.

On the other hand, Uber retains the right to terminate its drivers “at-will.” This shows that Uber retains serious control over their drivers. Additionally, the star rating system that allows Uber to monitor its drivers’ performance hints to a high degree of control (passengers rate drivers from one to five stars, five stars signaling a great experience).

In my opinion, Uber drivers should be regarded as employees. While Uber drivers have a wide degree of latitude in setting their own schedules, routes, and passengers, they are largely within the “control” of Uber. The California Supreme Court, for example, has held that “a putative employer’s right to discharge a hiree at will, without cause, is ‘[p]erhaps the strongest evidence of the right to control.’”[7] Furthermore, without the Uber interface, Uber’s drivers could not do their jobs. They could pick people up and drop them off, but the form of payment is through the app itself. The app also dispatches drivers, without it drivers would have no idea where potential passengers were located. The degree of control the Uber app itself has over the Uber drivers’ ability to work and be compensated for that work makes me feel that the drivers are employees.

Current State of the Law

The current class-action lawsuit against Uber in California obtained class certification in September 2015.[8] Approximately 160,000 drivers make up the putative class. A settlement of $100 million as well as injunctive relief of policy changes was agreed upon; however, the trial judge refused to approve the settlement.[9] The Ninth Circuit ruled that Uber’s arbitration clause was enforceable.[10] An appeal is pending on the matter.[11] If the ruling stands, the trial would include only those drivers that opted out of the arbitration clause.[12]

[1] Independent Contractor (Self-Employed) or Employee?, IRS, https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee (last updated Jul. 7, 2016).

[2] Westover v. Stockholders Pub. Co., 237 F.2d 948, 951 (9th Cir. 1956).

[3] Independent Contractor (Self-Employed) or Employee?, IRS, https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee (last updated Jul. 7, 2016).

[4] Id.

[5] Id.

[6] Id.

[7] O’Connor v. Uber Technologies, Inc., No. C–13–3826 EMC, 2015 WL 5138097, at *19 (N. D. Cal. Sept. 1, 2015).

[8] Id.

[9] http://uberlawsuit.com/ (last visited Oct. 7, 2016).

[10] Id.

[11] Id.

[12] Id.

Advertisements