A California labor commission has ruled that an Uber driver has won the right to be treated as an employee of the taxi app upstart, rather than as a contractor.
The decision threatens to disrupt the disruptive tech biz: moneybags Uber keeps its costs fantastically low by treating its drivers as freelancers, meaning they have to personally foot the bills for bridge tolls, repairs, gas, and so on, after ferrying passengers around town.
Today's ruling by the commission, handed down in San Francisco, may turn that business model on its head, by forcing Uber to cover its drivers' expenses. That could cause Uber's costs to soar, and force the biz to dump thousands of cabbies from its service to balance the books.
Where it all started
Barbara Berwick, who used Uber's app to offer a taxi service in the Bay Area, sued the company to claw back mileage costs and bridge tolls that Uber wouldn't give her. The biz argued she was a contractor, and thus it was not subject to liability.
However, the commission decided that Uber maintains enough control over when and how its drivers work that it should be considered a primary employer and not just a logistics firm for freelancers.
"In other words, there is a presumption of employment," Ellen Kennedy, a deputy labor commissioner, said in her ruling.
"The party seeking to avoid liability has the burden of proving that persons whose services he has employed are independent contractors rather than employees."
The decision orders Uber (valued at $50bn) to cough up $4,152 to Berwick, and it could set a precedent, allowing drivers to extract extra dosh from the upstart should the cabbies seek refunds from the dial-a-car service.
Uber remains defiant. The smartphone app company said the order will not hit its operations, and it can appeal the decision.
"The California Labor Commission’s ruling is non-binding and applies to a single driver. Indeed it is contrary to a previous ruling by the same commission, which concluded in 2012 that the driver ‘performed services as an independent contractor, and not as a bona fide employee," Uber said in a statement.
"Five other states have also come to the same conclusion. It’s important to remember that the number one reason drivers choose to use Uber is because they have complete flexibility and control. The majority of them can and do choose to earn their living from multiple sources, including other ride sharing companies."
Separately, a class-action lawsuit was filed several months ago in California against Uber by drivers seeking reimbursement for their milage and repair costs. They also want to be treated as employees, rather than contractors, so today's decision will be a boon for them.
Away from San Francisco, where Uber is headquartered, the car-hire service was dealt a setback by the New York Police this month. The New York Post reports that 496 cars were taken off the streets of NYC over charges of running illegal livery cars through Uber. ®