In a decision that could have far-reaching consequences for Uber and the whole ridesharing industry, the California Labor Commission has ruled that Uber drivers are actually employees.
According to Reuters, “the ruling earlier this month and filed Tuesday in state court in San Francisco, said Uber is ‘involved in every aspect of the operation.'”
Of course, Uber has always argued that its more than one million drivers around the world are simply contractors, not employees. As you would expect, Uber is set to appeal this decision.
Uber drivers have existed in a sort of grey area between employee and contractor.
As Slate points out, “their hours are flexible—but only to a point. Uber, for example, has threatened to suspend the accounts of drivers who accept less than 90 percent of rides. The same is true of drivers’ control over their work. Uber and Lyft might not make drivers wear uniforms, but the companies do instruct them on other points—how to interact with passengers, what kind of music to play during rides—and threaten to deactivate drivers who don’t meet standards.”
Uber’s argument has always been that it’s a software company. Uber connects people wanting a ride to those offering a ride. It’s a logistics company. Uber simply connects third-party contractors with customers.
But this new ruling turns that on its head. Suddenly, Uber could be a true transportation startup with a million employees. Talk about a shift in the business model.
“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. We have appealed this ruling,” said Uber in a statement.
Image via Uber, Facebook