Could increase costs for Uber.
By Raif Karerat
WASHINGTON, DC: In a verdict that could significantly increase costs for ride-hailing companies like Uber and Lyft, the California Labor Commission ruled this week that a driver who filed a complaint against Uber Technologies was an employee, not an independent contractor.
Currently, Uber employs its drivers as third-party contractors, according to TechCrunch, operating as a logistics company that provides access to customer demand and directions, transactions, etc. for its drivers.
“Uber has argued repeatedly in various courts that it is not a transportation or taxi company, but rather a software platform that matches customer demand with supply,” TechCrunch wrote.
However, the recent ruling could mark a paradigm shift for Uber and other ride-hailing services such as Lyft.
If Uber drivers are employees, that opens Uber up to higher costs, including Social Security, workers’ compensation and unemployment insurance, reported Reuters.
The suit was filed by Barbara Berwick, who worked for Uber from July to September of last year. She argued for extra compensation for her stint, including reimbursement for certain costs, reported USA Today.
The court denied Berwick’s claim for extra wages, but granted her claim for reimbursable expenses, including $3,622 for the 6,486 miles she drove on behalf of Uber, as well as $256 in toll charges. She was also granted $274 in interest.
“This ruling out of California causes the financial engine behind Uber to break down because this will definitely drive up costs,” Hayley Dryer, a labor employment attorney with Cullen and Dykman, told USA Today.
TechCrunch reached out to Uber and garnered the following response:
Reuters’ original headline was not accurate. 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.’ 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.