Uber Drivers Case Illustrates Challenges, Threats To More Flexibile Work Arrangements

June 19, 2015

A state court appeal filed this week by ride-share giant Uber has brought to light a decision earlier this month from the California Labor Commission that the company’s drivers are employees, not independent contractors, as the company has repeatedly maintained.  Uber separately faces a federal court challenge that will allow a jury to decide the employment classification of its drivers. Though the Commission's decision is not binding outside of California, the district court judge is likely to take it into account.  Beyond finding that the plaintiff’s work was “integral” to Uber’s business of providing transportation services, the Commission found that the company "is involved in every aspect of the operation."  The Commission ordered Uber to reimburse a former driver for mileage and toll charges amounting to over $4,000, which she had accrued during a two-month stint driving Uber riders.  If upheld, the decision would mean that Uber and similar web-based companies may need to change cost structures to provide for health insurance, salaries, and other benefits.  The Affordable Care Act's (ACA) employer mandate requiring employers to provide health insurance to all employees working over 30 hours per week, in particular, would force Uber to provide health insurance to its drivers, reduce driver hours to 29 or less per week, or pay a penalty.  The decision, if upheld, would also make companies like Uber responsible for providing a minimum wage, worker’s compensation, and other costs and statutory protections afforded to employees.  In a Washington Post op-ed this week, moderate Democrat Senator Mark Warner (D-VA) presaged a broader debate on what he calls the "gig economy" by observing that "these workers, even if they are doing very well, exist on a high wire, with no safety net beneath them.  That may work for many of them–until the day that it doesn't.  That's also the day that taxpayers could be handed the bill, which is why Washington needs to start asking some tough policy questions."