The minor blow that Uber was dealt earlier this week by the California Labor Commission could ultimately be a very big deal for those working in the modern “sharing economy.”
At issue is whether Barbara Ann Berwick, a former Uber driver, should be classified as an employee of the company, entitling her to various benefits and protections, or merely an independent contractor.
The commission ultimately
Although Uber claims to be merely a technological platform that facilitates connections between drivers and passengers, the Commission disagreed. Reasoning that Uber is “involved in every aspect of the operation,” and that the work of Berwick was “integral to [Uber’s] business,” the commission ruled that she must be classified as an employee of the company.
This ruling comes on the heels of other decisions that focus on the differences between employees and independent contractors, one of which resulted in FedEx entering into a $228 million settlement with its California workers. It’s a sign of the increased scrutiny some regulators and courts are giving the labeling of workers as independent contractors in these new disruptive industries.
In Uber’s case, this ruling only directly affects Berwick. Were it to apply to the whole country, or the whole state, Uber would likely have to drastically alter its business model to make up for the increased expenses.
This would ultimately be a good thing.
Many laud the benefits of Uber-like industries, claiming they will bring prosperity to all and even reduce income inequality. What these businesses actually do is shift the risks and costs of the employer-employee relationship onto the workers.
Because Uber drivers are classified as independent contractors, all the expenses that come with driving a car – money for gas, insurance, maintenance, etc. – must be paid for by the drivers themselves. It also means that they are not entitled to a variety of benefits and protections that come with being classified as an employee.
While those who are wealthy enough to partake in this new “sharing economy” benefit immensely from the convenience it provides, those who depend on it for a living are denied the various benefits of employment that should be the right of those working in our society.
Just last week, the Economic Policy Institute released a report detailing the extent to which workers are hurt by being classified as independent contractors, which decreases their bargaining power and often results in wage theft.
The Uber case is just a prelude to what is sure to be a long legal journey to determine how the “sharing economy” should exist in our regulatory framework. Whether it is handled on a state-by-state basis or settled by changes to federal law, the challenge will be to set up a social safety net for workers who do not function as a classic employee working fixed schedules at a fixed wage – and to recognize that workers in these industries have fundamental rights.