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Uber and Lyft Drivers Might Be Employees, Not Independent Contractors, Under California Law

McBride Law Blog

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Berwick v. Uber.

In 2014, Uber and a middleman Rasier-CA LLC (collectively referred to as “Uber”) employed Berwick as a driver in San Francisco, California, under the terms of a written agreement.[1]  The agreement provided, in relevant part, that Berwick was entitled to accept, reject, and select among service requests and that Berwick was to perform accepted requests in accordance with certain rules, which include, among other things:

  • provide and maintain liability insurance and vehicle(s) approved by Uber that meet certain standards;
  • accept a service fee determined and remitted by Uber, and nothing else (e., no tipping), which, at Uber’s discretion, may amount to nothing at times (e.g., waived cancellation/no-show fees);
  • use an iPhone provided by Uber to access the app, unless the driver already has a compatible phone; and
  • maintain a performance rating of 4.6 or greater, below which level Uber can effectively terminate the driver.[2]

Uber asserted that Berwick was an independent contractor and, thus, she was not entitled to recover any expenses, such as parking ticket and toll charges, or claimed wages for the actual hours she worked.[3]  Uber’s principal argument was that it is a technological platform, a smart phone app that merely provides administrative support, and that it exerts very little control over Berwick’s hours or activities.[4]

As you may have guessed, this argument did not fly.  The labor commissioner considered various factors under California law to determine whether Berwick was an employee, rather than an independent contractor, including, among other things:

  • whether the worker is engaged in an occupation or business distinct from that of the principal;
  • whether the work is a part of the regular business of the principal;
  • whether the principal supplies the tools and the place for the worker;
  • whether the service rendered requires a special skill; and
  • the worker’s opportunity for profit or loss depending on his or her managerial skill.[5]

Here, the commissioner found that Uber retained all necessary control over the operation as a whole, by obtaining clients in need of the service and providing the workers to conduct it, controlling the tools the drivers use (i.e., the vehicle), and having the sole discretion to negotiate service fees with passengers.[6]  Although Berwick owned the vehicle used to perform the work, the commissioner noted that ownership of the vehicle used may be a much less important factor in industries other than transportation, given that a person making pizza deliveries using his own vehicle was held to be an employee of the pizzeria under California law.[7]  The commissioner went on to note that Berwick’s work did not entail any managerial skills that could affect profit or loss and that she would not have been able to perform the work without Uber’s intellectual property, marketing, and advertising, all of which were essential to the work.[8]  Most importantly, the commissioner found that Berwick’s work was integral to Uber’s business, without which Uber’s business would not exist.[9]  While Uber held itself out as nothing more than a neutral tech platform, the commissioner said, the reality was that Uber was involved in every aspect of the operation.[10]  Accordingly, the commissioner held that Berwick was Uber’s employee and ordered Uber to pay Berwick’s mileage allowance and toll charges, among other things, incurred in the course of her work for Uber.[11]

Uber has filed a notice of appeal with the Superior Court of the State of California.  Although the case affects only one driver, if the court agrees with the labor commissioner that Berwick is an employee, it could have significant implications for Uber, which may have to start paying minimum wage, overtime, reimbursement for expenses, Social Security, Medicare, workers’ compensation, and all the other legal protections afforded to employees, as well as related recordkeeping.

This post was a part of a multi-post blog series on whether Uber and Lyft drivers are employees, as opposed to independent contractors, under California law.  You can find the other posts by searching our blogs at www.mcbrideattorneys.com. In our next post, we will discuss Cotter v. Lyft,[12] another recent California case involving Lyft.

 

This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein.  This is not meant to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances.  This article should not be treated as legal advice to any person or entity.

Steps have been taken to verify the contents of this article prior to publication.  However, readers should not, and may not, rely on this article.  Please consult with counsel to verify all contents and do not rely solely on this article in planning your legal transactions.

About the Author

Shawn McBride – R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Office, P.L.L.C. which helps clients in legal issues related to starting companies, joint ventures, raising capital from and negotiating with investors and outside General Counsel functions. Shawn can be contacted at: (214) 418-0258; shawn.mcbride@rsmlawpllc.com, or www.mcbrideattorneys.com.

[1] Id. at 2.

[2] Id. at 2–5.

[3] Id. at 6.

[4] Id.

[5] Id. at 7.

[6] Id. at 8–9.

[7] Id. at 8 (internal citation omitted).

[8] Id.

[9] Id.

[10] Id. at 9.

[11] Id. at 10.

[12] See generally Cotter v. Lyft, 13-cv-04065-VC (N.D. Cal. Mar. 11, 2015).

Posted In: Business Management, California Law Update, Uncategorized

Facebooktwittergoogle_pluslinkedinmailAbout the Author Shawn works successful, private business owners in their growth and missions to make a company that stands the test of time. You can email or call (214) 418-0258.

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