Articles

Employer Alert: CA Labor Commissioner Finds Uber Drivers Misclassified as Independent Contractors

June 23, 2015

In an order issued on June 3, 2015, the Division of Labor Standards Enforcement (“DLSE”) awarded just over $4,000 in expense reimbursements to Barbara Berwick, who had worked as a driver for Uber Technologies, Inc. (“Uber”).  Berwick claimed that she should have been classified as an employee, while Uber argued that she was properly treated as an independent contractor.

Uber is a smart phone application that private vehicle drivers and passengers use to facilitate private transactions.  Uber provides administrative support to the passengers and the drivers.  The driver uses the application whenever she wishes to notify passengers that she is available to transport them, and the passengers use the application to request a ride.

Berwick had asked Uber to remit all payments to a California corporation she had created in 1988, Berwick Enterprises, and Uber complied with that request.  In her complaint before the DLSE, however, Berwick complained that Uber failed to pay her directly, and also sought reimbursement for gas, bridge tolls, and a parking ticket she incurred for stopping in a lane of traffic to drop off a passenger.

Uber argued that it did not exert any control over the hours Berwick worked, but the DLSE found that “by obtaining the clients in need of the service and providing the workers to conduct it, [Uber] retained all necessary control over the operation as a whole.”  The DLSE compared an Uber driver to a pizza delivery person, who in a prior case was held to be an employee of the pizzeria notwithstanding the fact that the delivery person was required to provide his own car and pay for gasoline and insurance.  The DLSE went on to note that the driver’s work was integral to Uber’s business, for without drivers to provide transportation services to passengers, the business would not exist.

The DLSE found conclusive evidence that Uber was, in fact, involved in every aspect of the operation:  Uber vets prospective drivers, requesting drivers’ personal banking and residence information, Social Security numbers, and conducting background and DMV checks.  Drivers must register their cars with Uber, and Uber requires that the cars be less than 10 years old.  The passenger pays Uber a set price for the trip, and Defendants pay the drivers a non-negotiable service fee.  Only Uber may negotiate a cancellation fee with a passenger who cancels a trip, and Uber discourages its drivers from accepting tips.  On these grounds, the DLSE found that Berwick was Uber’s employee rather than an independent contractor.

On that basis, the DLSE went on to award reimbursable expenses to Berwick (it denied her claim for additional wages, as the wages were paid to her corporation).  The opinion is significant given that Uber employees over 160,000 “active drivers” nationwide, and the number of new drivers signing up has doubled every six months for the past two years[1].  Uber could face additional claims; at least one class action lawsuit involving misclassification is already pending in the Northern District of California[2].

Uber filed an appeal from the award of the DLSE in the Superior Court of California, County of San Francisco, on June 16, 2015, Uber Technologies, Inc. v. Barbara Berwick, Case No. CGC-15-546378.  We will post additional information about the case as it becomes available.

The Uber case is significant in that it further evidences the risks in misclassifying employees as independent contractors.  Employers can be responsible to the employee for lost wages, reimbursable expenses, overtime, and can also face liability to the IRS and Franchise Tax Board for failure to withhold payroll taxes, as well as criminal penalties.

If you have questions about how this development impacts your business, please contact one of Berliner Cohen’s employment attorneys.

Christine H. Long, (408) 286-5800, christine.long@berliner.com

Susan E. Bishop, (408) 286-5800, susan.bishop@berliner.com

Eileen P. Kennedy, (408) 286-5800,  eileen.kennedy@berliner.com

Kara L. Arguello, (408) 286-5800, kara.arguello@berliner.com

Jennifer Y. Leung, (408) 286-5800, jennifer.leung@berliner.com

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[1] The Washington Post, “Now We Know how Many Drivers Uber has — and Have a Better Idea of What They’re Making​”, Emily Badger, January 22, 2015.

[2] O’Connor v. Uber Technologies, Inc., Northern District of California, San Francisco Division, Case No. C-13-3826 EMC.