Overview: Two of the most successful new companies in the world are about to change their business plans: Uber and Lyft. The California Labor Commissioner’s office ruled, as did two federal courts in California two months ago, that Uber’s drivers are employees and not independent contractors so entitled to overtime, minimum wages, withholding and reimbursement of business expenses. The new ruling analyzed in the Law Review will no doubt generate a ton of claims against the companies with the Commissioner’s office.
A couple of months ago the Law Review analyzed two separate federal cases filed in California against Lyft and Uber, the extremely successful ride-hailing companies doing business in California and other states as well as Europe.
When I say successful, consider this: Uber was founded five years ago and is now valued at $50 billion – with a B. The company operates in more than 300 cities across six continents.
The latest ruling against Uber was last week by the California Labor Commissioner’s office which concluded, just as the two federal courts did, that Uber drivers are employees and not independent contractors. The Order itself goes into great detail on why Uber drivers are more likely employees than independent contractors. I disagree but what do I know.
That means that former Uber driver Barbara Berwick, who drove for only eight weeks, suggesting to me she set herself up to intentionally sue Uber, was awarded reimbursable business expenses plus interest totaling $4,152.20.
The Labor Commissioner’s office concluded Uber was more than merely “an app that connects drivers and passengers” with no control over the manner and means of its drivers, but in fact had numerous conditions of employment putting them into the standard employee category.
In case you’re wondering who Berwick is, in the last few years she has apparently filed over 17 lawsuits. I’m not a big fan of people who make a living suing others, so I hate to see her rewarded for her brief contrived and premeditated experience with Uber.
More Suits Coming
Given that filing a claim with the Labor Commissioner’s office is a relatively simply matter, we’ll probably see thousands of new claims filed in California by former Uber and Lyft drivers, each one knowing the result—a payday. Like a severance check.
Uber has prevailed in at least five other states by having courts conclude its drivers are independent contractors who can drive or not drive as they wish and who have control over their ride-hailing enterprise. Other state courts have ruled against Uber. You can be sure this is headed to a higher court, maybe even the U.S. Supreme Court.
Uber has 22,000 drivers in San Francisco, 26,000 in New York and 15,000 in London. In China, one million Uber rides are taken every day. The company is facing several class-action law suits and has been met with hostility in several European countries, backed by taxi drivers and labor unions.
Future of Uber and Lyft?
I don’t know what happens next for these two companies. What I do know is I should have invested in both. Instead I invested in buggy whips and eight track tapes. Shoulda, coulda.
In time we will get a definitive ruling on whether the drivers are employees, and if so, there will be a minimum wage, withholding, payment into social security, reimbursement of expenses, overtime—everything the rest of us experience on our paychecks.
That alone won’t topple the companies of course but you can count on higher costs for users and a modified business model.
Jim Porter is an attorney with Porter Simon licensed in California and Nevada, with offices in Truckee and Tahoe City, California, and Reno, Nevada. Jim’s practice areas include: real estate, development, construction, business, HOA’s, contracts, personal injury, mediation and other transactional matters. He may be reached at email@example.com or www.portersimon.com.
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The content contained and opinions expressed in this blog are solely those of the author. This blog contains content and opinions concerning the law generally, and is not intended to constitute legal advice or to create any attorney‑client relationship with the reader. The reader should consult with an attorney about any specific legal issues prior to embarking on any course of action or inaction involving legal matters.