When is an Uber Driver an Employee?

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In at least some cases, Uber drivers — considered by their $60 billion company as “independent contractors,” the benefits-less workers who are the backbone of all of Silicon Valley's “sharing economy” darlings — are employees. The problem is figuring out which cases.

Earlier this year, Patrick Ely, a former UberX driver in the San Diego area, was awarded unemployment benefits from the state Employment Development Department. This was significant: Unemployment goes only go to employees. And Ely's case was not the first time an Uber driver had been declared an employee: In 2015, Uber fought — and lost — an earlier EDD decision declaring a Southern California driver an employee.

It appears EDD deals with Uber drivers with some regularity. Former Uber drivers seeking unemployment are given a questionnaire specifically tailored to them.

A spokeswoman for EDD declined to state how many Uber (or Lyft, or Sidecar) drivers had been awarded unemployment benefits or what makes a driver an employee; in an emailed statement, an Uber spokeswoman dismissed the case as an outlier and noted labor departments in 13 states have determined Uber drivers to be contractors.

(Left unsaid was the undeniable fact that labor departments, like California's, have, at other times, also deemed Uber drivers to be employees.)

Mark Burton, an attorney with San Francisco-based Audet & Partners who handled Ely's case, believes there are two key factors at work. One is Uber's ability to change drivers' terms or dismiss them at any time — which it did when it monkeyed with their rates earlier this year, and which it does when a driver's rating or acceptance rate falls too low, as it can for rejecting out-of-the-way ride requests.

“If I can get rid of you tomorrow, you are generally an employee,” he says. “The ability to terminate somebody at a moment's notice plays a very important part in whether you are an employee or an independent contractor.”

The second is the necessity of drivers to Uber's business model. And, at least for now, Uber — which is very openly exploring driverless technology — cannot exist without drivers.

“Uber has to have these people in other to make their money,” Burton adds.

But all that matters to the EDD, and not necessarily the federal courtroom.

In a few months, Uber's business model will be on trial in O'Connor vs. Uber Technologies, a federal case challenging the ride-hail giant's designation of its drivers as independent contractors. Arguments are scheduled to begin in June. But in the meantime, state labor departments are drawing their own conclusions.

Burton thinks individual drivers — who have until March 29 to opt out of the O'Connor class action lawsuit — stand a better shot at a financial windfall. The state's roughly 55,000 Lyft drivers in that company's class-action suit, he points out, currently stand to share a $12.25 million settlement, which could amount to a paltry $60 per driver after attorney's fees — or barely enough to get home the next time surge pricing is in effect, no matter the nature of your job.

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