CA Uber driver ruled employee

UberNavigating the choppy regulatory waters of America’s 50 states just became more difficult for Uber. The fast-growing startup that has roiled the taxi and livery industry was dealt an adverse ruling by the California Labor Commissioner’s Office. As the New York Times reported, the CLC found that a onetime Uber driver should have been “classified as an employee, not an independent contractor.”

A sharp rebuke

The initial damage to Uber was minimal. The ruling applied to one person, not an entire class, and because Uber immediately appealed, it has not yet had to change the way it does business. Nevertheless, Uber’s business model has been thrown into greater legal question than ever — along with potentially many similar startups. In recent years, the success of the non-employee model has flourished across so many sectors of the economy that “Uber for (fill in the blank)” has become a running joke in tech and media circles.

The CLC did not hesitate to raise broader questions about Uber’s business practices. “While Uber has long positioned itself as merely an app that connects drivers and passengers — with no control over the hours its drivers work — the labor office cited many instances in which it said Uber acted more like an employer,” according to the Times.

In a portentous remark making the rounds online, the CLC said Uber was “involved in every aspect of the operation” performed by its service, not a “neutral technological platform” that allows “drivers and passengers to transact the business of transportation.”

Market uncertainty

That language had the power to hit Uber where it hurts — not in the regulatory field, but in the pocketbook. “Uber’s vast business and multi-billion dollar valuation fundamentally depends on its assumption that drivers are independent contractors, and not employees,” observed a staff writer at Slate. “When drivers are treated as contractors, they carry the bulk of the company’s operating costs. Uber drivers are required to pay out of pocket for everything from gas to insurance to routine car cleanings and maintenance. It adds up fast.” If Uber must bear even a portion of those costs, driving down its profit margins and growth potential, the market’s reaction could be substantial and adverse.

Adding to the uncertainty, however, was the biggest regulatory question raised by the ruling: can the Golden State’s Uber drivers unionize? “They already have an interest group, the California App-Based Drivers’ Association,” as Business Insider noted. “And the group has met with the Teamsters Local 986 in El Monte, California.”

Last August, Business Insider continued, the Teamsters complained that “Uber management flatly refused to sit with members of CADA’s steering committee, and privately stated that it does not, and will not recognize any association that seeks to speak on behalf of drivers” — actions which, the Teamsters said, caused CADA to reach out “for organizational and lobbying assistance.”

A string of setbacks

The CLC’s ruling quickly helped cement the sense that the regulatory tide may be turning against Uber nationwide. Earlier in the year, Reuters reported, a state agency in Florida ruled Uber drivers to be employees. Earlier this month, “Uber lost a bid to force arbitration in a federal lawsuit brought in San Francisco by its drivers. Earlier this year, the same U.S. District Court rejected Uber’s bid to classify its drivers as independent contractors, saying a jury would rule on their status.”

Ironically, Uber and other rideshare services like Lyft had just scored a legislative victory in Sacramento. “After the companies began rolling out a feature allowing multiple passengers to split their fares and be dropped off in different destinations,” the Sacramento Bee reported, “the California Public Utilities Commission said state law would need to be tweaked to allow the option. Assembly Bill 1360 responds to that directive, drawing support both from the companies and from a range of environmental groups. It passed 69-0.” But another bill that would mandate background tests and drug tests for drivers has cleared two committees to date, the Bee added.

9 comments

Write a comment
  1. Richard Rider
    Richard Rider 18 June, 2015, 07:48

    IF this “employee” ruling stands, that should put an end to Uber in California. There’s no way that Uber can control the costs of these part-time drivers operating on their own.

    Our state has a special talent for opposing business innovation and efficiency. Somehow this is a fitting step in the stately downward spiral of the one-time Golden State.

    Reply this comment
  2. Richard Rider
    Richard Rider 18 June, 2015, 07:53

    It’s every bit as logical to make people employees who rent their homes out for short term rentals via Airbnb.

    California hates the self-employed model. Ideally everyone is either a business owner with employees (a.k.a. an ATM machine) or a union employee.

    Reply this comment
  3. Queeg
    Queeg 18 June, 2015, 09:07

    Comrades….El Duce Mussolini got up each morning semi-exhausted from issuing facist decrees regulating private commerce. Italy is still a economic basket case today.

    Uber is a slippery business model in infancy. Uber or some other business will get safety, accounting, insurance, background checks etc. correct.

    The future includes the little comrade using barter and sharing to maximize asset, capital, labor returns.

    Reply this comment
  4. Vitalik Buterin
    Vitalik Buterin 18 June, 2015, 16:41

    This is fantastic news for La’Zooz (and if you don’t know, now you know).

    Reply this comment
  5. Bill - San Jose
    Bill - San Jose 18 June, 2015, 17:28

    I have just witnessed two more companies making the move out of CA due to regulation and overreaching taxes. First hand knowledge of what these types of power grabs will damage areas still working to build such as Fresno and Tracy.

    tssk tssk

    Reply this comment
    • Richard Rider
      Richard Rider 18 June, 2015, 19:13

      Sadly, because of a fear of blowback/boycotts from liberal customers, CA state tax agencies (these rapacious outfits can harass a company for a couple years after they leave) and state regulators, most companies leave without announcing the REAL reasons they are departing.

      No profit in telling the truth. They just leave, with vague reasons given, if any.

      Reply this comment
  6. Richard Rider
    Richard Rider 18 June, 2015, 19:15

    Not too many businesses actually LEAVE. Some EXPAND in other states.

    But VERY few businesses move TO California — except retail companies.

    Reply this comment
  7. desmond
    desmond 19 June, 2015, 05:36

    Richard, Note the govt power grab as a result of the drought is now effecting business investment decisions in California, and not in a good way. Who would expand here not knowing if the state will shut off your water?

    Reply this comment
    • Richard Rider
      Richard Rider 19 June, 2015, 07:51

      Spot on. Any manufacturer that uses even relatively modest amounts of water in their operation has to reject the idea of drought-stricken California — because of the unpredictable availability of agua.

      Similarly, our CA sky-high commercial and industrial utility rates are a huge incentive for power uses to locate elsewhere.

      Not to mention workers’ comp — now the highest in the nation.

      I could go on. Indeed, I often do!

      To see my dreary fact sheet on these and other CA problems, go to:
      http://www.TinyURL.com/CA-vs-other-states

      Reply this comment

Write a Comment

Leave a Reply



Related Articles

In reform showdown, who does Obama administration target? Disabled CA students

During the budget theater of recent months, the Obama administration’s ruthless determination to make cuts hurt the public was on

Initiatives filed to extend Prop. 30 tax hikes

California’s temporary income tax hikes aren’t set to expire until 2018, but that hasn’t stopped Sacramento special interest groups from

Report: CA economic outlook grim, but actual performance not so bad

California again sits near the bottom of a state-by-state comparison of economic competitiveness, but its economic performance has been more middle-of-the-road,