In a somewhat unexpected, but not that surprising, ruling, the California Labor Commissioner, on June 3, 2015, issued a 12-page decision in favor of a pro se plaintiff driver against mighty Uber Technologies, Inc. for misclassification of the plaintiff as an independent contractor instead of an employee. The award though a modest $4,152.20 may have a multi-million dollar impact upon Uber and its competitors, particularly their business model and foundational argument that they are “just a neutral technological platform.”
The path started out difficult for Uber. The Labor Commissioner noted that California law presumes that a worker providing personal, not business, services is an employee, shifting the burden of proof of independent-contractor status to the employer. And, that burden, thanks to the Berwick ruling, just got Uber-heavy for the burgeoning tech-ride industry.
In finding in favor of plaintiff Berwick, the Labor Commissioner first cited to the well-established multi-factor employee-independent-contractor test spelled out by the California Supreme Court in S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations, (1989) 48 Cal.3d 34. Those factors included whether the worker’s occupation is distinct from the hirer’s; whether the work is part of the hirer’s regular business; and whether the work requires special skill. Uber argued that its evidence concerning these and other factors proved that Uber exercised little control over Plaintiff’s performance of her activities, thus, she was not an employee.
But the Labor Commissioner would have none of that, concluding that Uber lost on both macro and micro levels. From the macro perspective, the Commissioner determined Uber had missed the big picture:
However, the Borello court found that it was not necessary that a principal exercise complete control over a worker’s activities in order for that worker to be an employee. “The minimal degree of control that the employer exercised over the details of the work was not considered dispositive because the work did not require a high degree of skill and it was an integral part of the employer’s business. The employer was thus determined to be exercising all necessary control over the operation as a whole.” (Borello, supra, 48 Cal.3d at pp. 355-360.)
The Uber decision noted that Uber retained all necessary control by obtaining the clients who needed its services and then supplying the workers who provided the services.
On the micro level, Uber also lost, at least according to the Labor Commissioner. The Commissioner brushed aside Uber’s contention that it was a mere technology platform, and found that it was involved in “every aspect of the operation.” For example, Uber vetted prospective drivers (background and DMV checks), controlled the drivers’ tools (age of the cars, etc.), monitored drivers’ approval ratings, and provided the smart phone app (essential to the work). All these factors pointed to more control than not, and sealed the victory for the Plaintiff.
Uber recently appealed the Labor Commissioner’s award to the California Superior Court, so this matter is far from being resolved. However, the message is clear to all employers in California: Don’t think that increasing technology necessarily means decreasing employees.
Brian Inamine (Bio | LinkedIn) is a shareholder in our Los Angeles office and a member of the Labor and Employment team. Brian is a foodie (thanks to his daughter Elyse), a Seahawks fan (thanks to his son Eric) and a cocktail consumer (thanks to his daughter Elena).