A California Labor Commissioner has ruled that one of San Francisco-based Uber’s drivers, Barbara Ann Berwick, is an employee, not an independent contractor. The Labor Commissioner awarded Berwick just over $4,000 for incurred but un-reimbursed business expenses and interest. On a positive note, the Commissioner denied Berwick’s request for wages, liquidated damages, and waiting time penalties.
Traditionally, it is the “right to control” the means and manner of work that is the primary element of the independent contractor test. Here, though, the Labor Commissioner did not rely on the right to control. Instead, she noted that the absence of such control is not necessarily dispositive where the actual details of the work required little or no supervision.
Instead, the Commissioner’s decision found that other “Borello factors” justified finding that Berwick is an employee. First, the Commissioner was swayed by the fact that Berwick’s work is integral to Uber’s business, which provides transportation services to passengers. Without drivers like Berwick to transport the passengers, Uber’s “app” connecting potential passengers to potential rides, would be useless; its business would not exist. Second, Uber provided some of the tools essential to the work – its proprietary iPhone application. Third, Uber has total control over the service fee –if a passenger cancels, only Uber can waive the fee, not the driver, and Uber prohibits drivers from taking tips. Fourth, Uber carefully pre-screens its drivers and has the right to approve or reject the driver’s “fleet” vehicle.
The Commissioner was not persuaded by the equal number of Borello factors in Uber’s favor: that drivers make their own hours – indeed, decide whether to work or not, use their own “tools of the trade” (i.e. their own car), provide their own insurance, have to obtain their own permits, are paid “by the job” (each trip), and have no set length of employment – indeed, after a period of inactivity, their service is disconnected and the driver has to re-apply for access to the Uber platform.
The Commissioner’s decision only affects Ms. Berwick, but could prompt other drivers for Uber, Lyft and similar ride-hailing services to file their own complaints with the Department of Industrial Relations while the class action lawsuits percolate through the courts. Ms. Berwick, ever the entrepreneur hopes to capitalize on her award: she told Slate that she plans to offer classes – for a $50 fee – to other Uber drivers who want to copy her.
Of note, the Commissioner relied on dicta from the 1989 Borello case discussing the “modern” trend of looking to whether the work being done is an “integral part” of the regular business of the employer, and when the worker, relative to the employer, does not furnish an “independent business or professional service.” The Commissioner’s reliance on a 25-year-old case as guidance for what the “modern trend” is a bit dubious. It certainly does not reflect the modern world and the burgeoning growth of the smartphone-based “on demand” service industry which relies on razor-thin margins and provides opportunities for would-be entrepreneurs like Berwick that, if characterized as employees, could very well make the business model unsustainable and deprive those drivers of a lucrative income. Perhaps the time has come for a legislative carve out, similar to the real estate professional or computer software professional exemption.
Uber is appealing from the decision in the San Francisco Superior Court. We will continue to follow this case closely on this blog.