Earlier this year the ride-sharing company Uber scored a victory in its legal battles of whether Uber drivers should be classified as employees or independent contractors. In this most recent California case of employee misclassification, Uber Technologies Inc. reached a settlement offering its drivers an average of about $1 apiece to dispense with alleged labor-code violations that their lawyer claimed might have been worth billions of dollars.
The ride-hailing company, along with the drivers' lawyer, asked a state judge in Los Angeles in February to approve a $7.75 million agreement to resolve claims stemming from its refusal to give California drivers the protections and benefits of employees. The accord allows Uber to keep classifying the drivers as independent contractors.
Here's a brief rundown of other milestone cases against Uber:
- A 2015 California court decision determined that Uber drivers were employees entitled to certain benefits.
- Uber agreed to pay $100 million that appeared to resolve a massive class action case in April 2016
- Uber faced a rejection of that settlement by a federal court judge in August 2016 as the judge believed the resolution was not adequate.
- A 9th Circuit ruling in September 2016 handed Uber a significant victory by upholding the company's previously stated arbitration agreements.
- In February of this year, a Florida state appellate court ruled that Uber drivers are independent contractors, not employees, and therefore not entitled to unemployment compensation benefits when their working relationship with the ride service terminates.
Sexual Harassment Case Sheds Light on Employee Misclassification
A case from last year (November 2016), highlights reasons that some courts may feel Uber drivers are independent contractors. The case started with sexual harrassment allegations against Uber driver, Yosef Eisenberg. Eisenberg was “deactivated” by Uber for various reasons throughout his time with the company, however, his biggest troubles started with his alleged inappropriate contact with customers. The most egregious act took place in July 2015 when he gave a hug to a female passenger. Eisenberg vehemently reasoned that the female passenger was drunk and asked to sit in the front seat next to him. He said she wanted to “hang out with him” and that he only gave her a hug “to diffuse the situation” at the end of the ride. Uber learned of the situation and classified his behavior as sexual harassment after an investigation, permanently deactivating his status as a driver.
Impact of Eisenberg Arbitration on Employee Misclassification
Eisenberg brought a legal action against Uber in an effort to get his job back and to collect damages. His claim alleged he was an employee of the company and thus entitled to all of the protections and benefits afforded to employees in California. The claim went to an arbitration proceeding in July 2016 pursuant to the mandatory arbitration agreement signed by all drivers. In November 2016, the arbitrator ruled in Uber's favor and rejected Eisenberg's claim in a thorough 50-page written decision. The arbitrator noted that most of the factors present demonstrate that Uber does not maintain the right to control its drivers, and thus has no employer-employee relationship with them. Some of the factors cited by the arbitrator as determinative included:
- Uber does not provide drivers with an employee manual or handbook.
- To the extent the company offers training to its drivers, it is modest and brief (focusing on how to use the app itself and offering several customer service tips).
- Uber requires drivers to provide their own cars.
- Drivers are responsible for paying for their own vehicle repairs, gas, and liability insurance.
- The company does not guarantee drivers any number of rides per day.
- Drivers are not required to provide a minimum amount of time spent online ready to offer rides to passengers.
- Drivers can offer services to competitors, and in fact can be available for both Uber and any number of competitors at the same time.
- Uber offers no instructions to drivers on where to drive when they are on the app.
Drivers establish their own schedules.
- There are no required start and stop times for drivers.
- Uber drivers can take as long as they want for breaks and meals.
- Uber does not require drivers to request permission to shut down the app and go offline.
- Drivers have no responsibility to tell Uber when they are going to be off the app.
- Uber does not supervise its drivers.
- Drivers do not have to wear any special uniform or signage.
- Although Uber proposes suggestions to drivers on how to provide the best customer service experience, such as offering complimentary refreshments and cell phone chargers, using the most efficient driving routes, and providing a clean car, these are not mandatory rules.
The combination of all of these factors led the arbitrator to conclude that Uber drivers were properly classified as independent contractors. “The fact, alone, that Uber has an active interest in deactivating certain drivers,” he wrote, “does not establish an employer-employment relationship.” He concluded by noting that businesses are “permitted to exercise a certain measure of control for a definite and restricted purpose without incurring the responsibilities” of becoming an employer. The question has always been how much control is too much control to tip the scales from contractor to employee status, but in this case, the arbitrator found the scales tipped in Uber's favor.
On February 21, 2017, Los Angeles Superior Court Judge Michael J. Stern granted the arbitration award in favor of Uber, dismissing Eisenberg's claim. And while Eisenberg can appeal the matter to the court of appeals, this victory was crucial for Uber and could set the tone for future success on the issue in California and elsewhere.
California Employment Laws and Employee Misclassification
California employers and employees alike should understand the nuances of employer-employee relationships and ensure workers are properly classified. In this era of the “gig” economy, this issue is becoming paramount to employment law, from recruiting to compensation and benefits. As Uber cases around the country reach resolution, don't hesitate to contact leading employment lawyers at Kingsley & Kingsley with any questions you might have. Call toll-free at (888) 500-8469 or click here to contact us via email.