The ride-sharing application Uber, immensely successful across the United States and Europe, has revolutionized the sharing economy popular with Millenials, and anyone looking to circumvent traditional institutions like hotels, and taxis.
Uber made its mark by hiring drivers who use their own equipment and tools, and who operate as “independent contractors.” Employing a fleet of independent drivers ensures low prices for consumers, because drivers “use their own vehicles on their own schedules,” and are responsible for gas and vehicle maintenance, including their own insurance. Uber’s classification of its drivers has precluded the company from the legal morass of labor and employment regulations, which have instead hampered Uber’s taxi competitors. Conventional taxi companies formally hire workers and adhere to employment laws, and provide drivers with appropriate pay and benefits. Uber is unencumbered by similar regulations concerning its independent drivers.
Furthermore, under current regulations Uber is characterized as a technology company, operating a ride-sharing application through users’ smartphones, whereas taxis constitute transportation companies subject to a different, comprehensive regulatory scheme. Due in part to this characterization, Uber has avoided the heavy regulation of taxis. In addition, under the auspices of its technology application status, Uber is reportedly considering launching future business endeavors run through its popular application, including a local grocery delivery service. These business plans will be forestalled if Uber’s drivers are classified as employees, or if it loses its regulatory categorization as a technology application.
A class action against Uber in California has threatened Uber’s claim that its drivers are independent contractors, but similar litigation in Great Britain, resulted in a ruling underscoring Uber’s characterization as a technology application, distancing it from transportation companies. As these cases demonstrate, Uber faces an uncertain, shifting regulatory future.
First, in September, Federal Judge Edward Chen of the Northern District of California granted class status to Uber drivers in the latest stage of O’Connor v. Uber Technologies, Inc. et al., allowing the case against Uber to move forward as a class action. O’Connor will test Uber’s assertion that its contracting drivers do not qualify as employees. Uber’s amalgamation of “independent contractor” drivers is the heart of its profitability, and meteoric economic rise. Judge Chen’s certification of plaintiffs as a class constitutes an initial blow to Uber, who argued its drivers preferred to retain their independent status. Furthermore, affirmative class status in O’Connor has precedential value for Lyft, an Uber competitor in the midst of similar litigation.
Additionally, in August the California Employment Development Department ruled that Uber owed one of its drivers unemployment benefits. The California Office found dispositive evidence of the “’employer/employee relationship” between Uber and the driver, and Uber displayed indicia of control in the “means in which these services were provided.” In addition to this ruling, the California Labor Commission ordered in June that Uber reimburse its former driver, and claimant, Barbara Berwick for expenses she incurred, and that Berwick should have been treated at the time of her claim as an Uber employee.
Still other state agencies around the nation have found in favor, and against Uber in regulatory employment questions. Although precedential value of these agency rulings is negligible, the varying decisions reflect the uncertainty surrounding Uber’s central assertion: that its drivers are not employees eligible for certain benefits, or reimbursements for vehicle maintenance. Chen’s ruling that Uber employees qualified for class certification moved the O’Connor case a step closer to a jury decision on Uber’s business model.
In Great Britain, however, Judge Duncan Ouseley issued a ruling which affirmatively distinguished Uber from London’s taxi cab providers. The ruling saved Uber from being legally shut out of the London market, where it enjoys tremendous success. Ouseley ruled that Uber’s application was not sufficiently similar to a taxi cab meter, which by law may only be operated by “London’s black cabs.” Rather, Ouseley ruled,
“the company’s services relied on geospatial data and other technology outside its drivers’ cars to calculate the cost of each ride.”
Uber’s legal distance from existing taxi companies is important for its regulatory classification as a technology application, and will work in its favor as it faces pending cases in Europe. Still, Ouseley’s ruling underscores Uber’s key regulatory distinction from taxi companies, amid the onslaught of litigation plaguing the ride-sharing application.