Some bad news broke for Uber today — the California Labor Commission ruled that one of the company’s drivers was an employee.
Uber has long insisted that those drivers are independent contractors, not employees, and that’s a key part of the business model. However, Uber’s situation isn’t nearly as dire as it first seemed.
The initial story from Reuters suggested that the decision applied to all Uber drivers, and some follow-up articles made the same mistake. (We’re guilty. Our story is now corrected.) However, Uber released a statement saying that the decision is “non-binding and applies to a single driver.”
And while you’d expect the company to downplay the significance here, I also spoke to several lawyers and legal experts, who confirmed that that’s the case.
For example, startup-focused lawyer George Grellas wrote on Hacker News that “this ruling has basically symbolic importance only.” That’s particularly true since Uber is appealing the commission’s decision, so this case will be decided in court (and with further appeals, that process could take years).
“This doesn’t mean that Uber doesn’t have a huge battle on its hands, both here and elsewhere,” Grellas wrote. “It just means that this ruling sheds little or no light on how it will fare in that battle.”
When I called Grellas to follow-up, he told me that the commission tends to have a bias against employees, so it’s best to think of the ruling as “a preview” of the arguments made by those pushing to classify drivers as employees.
We’ve contacted the Labor Commission’s press department for comment but have not received a response.
I also spoke to Charley Moore, a corporate lawyer as well as CEO of legal startup Rocket Lawyer, and while he acknowledged that the decision isn’t binding, he also argued, “The overaching point is that the law hasn’t caught up with the economy. In this case, the Labor Commission is really applying a set of antiquated analysis … to the business model at hand.”
Meanwhile, Reuel Schiller, a professor of law and associate dean of research at UC Hastings, noted that whatever the courts ultimate decide, the implications will be limited for other Uber drivers. The question of whether someone is an employee or not is “a very fact-intensive test,” he said.
In other words, the courts could rule differently depending on whether you’re talking about someone who’s a full-time Uber driver and on the road for many hours every day, versus someone who picks up an extra passenger on their way to work.
But if Barbara Ann Berwick, the driver in this case, prevails, couldn’t other drivers follow in her footsteps? And if they do, couldn’t the Labor Commission make similar rulings?
“Well, yes,” Schiller said. “It would be naive to assume that this is an outlier. It’s clear that this is a vulnerability of Uber’s.”
And while Moore portrayed this as an example of antiquated regulation, Schiller suggested that cases like this will show whether Uber and other on-demand companies offer truly better experiences than the competitors. Or are they simply succeeding because they’ve avoided the level of regulation faced by the taxi industry?
“It’s not actually a fair contest,” Schiller said. “All of these types of lawsuits, and the way that Airbnb has gotten raked over the coals by New York State Attorney Generals … What the public is going to find out is whether there’s milk in those bottles. Is the product actually better if it has to play on a level field?”
