California Ruling Could Spark Big Changes at Uber

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Just because Uber claims its drivers are independent contractors doesn’t make it so. The California Labor Commission has ruled that Uber drivers should be classified as Uber employees, not contractors.

If the decision is upheld, it could have a far-reaching effect on how the on-demand service is managed across the United States. The case is part of a larger debate between labor activists, who argue that Uber and other on-demand companies are taking advantage of workers, and others, who argue that the business model creates needed efficiencies.

The commission’s June 3 ruling came to light when Uber filed an appeal Tuesday, The New York Times reports. The California ruling ordered Uber to reimburse former driver Barbara Ann Berwick more than $4,000 for mileage and toll expenses she accrued while using her vehicle as an Uber driver.

“Uber has long positioned itself as a ‘logistics company,’ an app that drivers and passengers use merely to facilitate private transactions, and not a transportation fleet with tens of thousands of employee drivers,” the Times said.

While Uber maintains that it doesn’t control the hours its drivers work or require them to complete a set number of trips, the Labor Commission said in many instances Uber acts like an employer. For instance, Uber provides its drivers with phones and deactivates its app for drivers who are inactive for 180 days, according to the Times. Uber also vets its drivers, controls passenger payments and dictates what types of vehicles drivers can use.

If the California ruling is upheld, it could drastically change the way Uber treats its 160,000 U.S. drivers, CNN Money said. Uber could be looking at paying Social Security, health care and other benefits for drivers.

“Uber has made a killing by deferring all its expenses to its employees,” said Shannon Liss-Riordan, a labor lawyer who’s representing Uber drivers in a separate class-action lawsuit. “This ruling could be significant to our case.”

Uber said in a statement that the ruling contradicts a previous ruling by the California Labor Commission as well as five other states.

“Drivers … have complete flexibility and control,” said the statement. “The majority of them can and do choose to earn their living from multiple sources, including other ride-sharing companies.”

The San Francisco-based Uber was recently valued at $40 billion, the Times said. It has become the poster child for the on-demand economy.

“These online services and apps act as virtual labor marketplaces for people willing to use their own possessions — cars, homes, even parking spaces — to provide services to the public at the touch of a smartphone button,” the Times said.

Uber, which started just five years ago, has experienced explosive growth. It’s also expanded globally.

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