Calif. Employment Dept. Rules Uber Driver Is Not Contractor

Uber, the popular app-based ride-hailing company, has lost another legal battle in the ongoing debate over whether or not its drivers should be considered employees or independent contractors.

Officials at California’s Employment Development Department (EDD) recently determined that a former Southern California Uber driver qualified as an employee of the company, not an independent contractor, and as such was entitled to unemployment benefits.

Agency Rules Uber Driver Entitled To Benefits

The department’s initial determination was based on an application for unemployment insurance benefits the former Uber driver filed in April 2014.  In the EDD case, a former California Uber driver filed for unemployment benefits last year. The EDD found that the former Uber driver was entitled to receive benefits, and Uber appealed that decision on the grounds that their drivers are independent contractors, not employees.

An administrative law judge found that Uber does act as an employer, regulating who an Uber driver can and can’t pick up while logged in to the app, setting fares, and deactivating drivers who break the rules or receive too many bad reviews.

While a decision by the California EDD only affects one employee and their claim for unemployment benefits, it’s yet another public endorsement from a government agency that the people who drive for Uber have an employer-employee relationship with the company.

This in theory should entitle them to benefits that employees receive: reimbursement of vehicle costs, having the employer’s portion of their income taxes paid, and receiving unemployment benefits when their employment with the company ends involuntarily, if applicable.

This latest decision is not the first time a state agency has determined an Uber driver was an employee. In May, the Florida Department of Economic Opportunity found that Uber driver Darrin M. was an Uber employee and thus eligible for unemployment insurance.

In June, the California Labor Commission, which investigates wage claims, decided that former Uber driver Barbara B. was entitled to unpaid wages and reimbursement for business expenses in the nine weeks she worked as an Uber driver last year.

Both of these employee misclassification lawsuits are under appeal by Uber. According to an Uber spokesperson, labor or unemployment boards in nine states have found drivers on multiple occasions to be independent contractors: Georgia, Arizona, Pennsylvania, Colorado, Indiana, Texas, New York, Illinois and California.

In a separate instance earlier this month, a US District Court judge ruled a lawsuit involving California Uber drivers,which claims they were misclassified as independent contractors, can proceed as a class action lawsuit.

Employee or Independent Contractor?

The proper classification of workers as employees or independent contractors is not a new concern for many California employers. Unlike employees, independent contractors are not subject to a variety of employment laws, including California wage and hour laws, anti-discrimination laws, and unemployment and workers compensation requirements.

For a company like Uber, employee misclassification also may have a significant impact on its business model moving forward, particularly if the company (and similar companies) is required to undertake greater overhead expenses and assume greater risks in offering services to the public.

The cases mentioned above are representative of the mounting controversy surrounding the Uber contractor business model, with the company insisting it is not a transportation service, but simply a matchmaker between riders and drivers.

And while Uber continues to fight the legal battles over the way it classifies its drivers as independent contractors, not employees, this latest EDD decision could give drivers even more recourse for taking legal action against Uber.

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