UBERIZATION OF THE WORKPLACE, PART 4: UBERIZATION OF EMPLOYER/EMPLOYEE/INDEPENDENT CONTRACTOR RELATIONSHIPS – IT’S NOT ALL SUNSHINE IN CALIFORNIA

This blog post is part four of a six part series on the impact the Uber business model is having on employment laws across the nation.

All eyes and ears have been turned toward the courtroom of the Honorable Edward M. Chen, sitting the in the United States District Court for the Northern District of California, where Uber has been mired in litigation.  Some Uber drivers, claiming to be employees rather than independent contractors, have been attempting to institute a class action on behalf of some 160,000 California Uber drivers.  A subset of these drivers was granted class action status on September 1, 2015, with thousands more added a few months later in December. 

Previously, in March, the Court issued an opinion denying Uber’s motion for summary judgment (pre-trial dismissal) on the issue of whether its drivers were independent contractors.  The Court weighed the same factors used by the WHD, with some additional considerations under California law, and found that numerous factors pointed to different conclusions, and some facts, particularly those relating to Uber’s control of the drivers, were in dispute.  As a result, the issue will be decided by a jury.  Relatedly, the Court considered the independent contractor status factors to determine whether a class could be maintained, albeit in a different manner.  Its analysis in both decisions hints at where the Court would land on each factor at this time.

The World According To Uber

In its legal briefing, Uber talks about itself and its relationship with its drivers.  At its essence, Uber developed software (an app) that “permits riders to arrange trips with nearby transportation providers.”  Uber denominates itself as a technology company, not a transportation company – after all, it doesn’t own any vehicles.  “When a rider sends a request for a driver using the Uber App, it is routed to the nearest driver, who is given an opportunity to accept or decline the ride.”  Uber calculates the fare and collects a percentage as a “software licensing fee” with the remainder going to the driver or partner (which may also be a third-party business that contracts or employs its own drivers).  In the towns in which I have used Uber, the tip was stated to be included in the fare, although this does not appear to be the case.  One of the issues in the Uber lawsuits are claims that drivers are not receiving their tips, and Uber’s representations that tips are included in the price of the trip are preventing them from otherwise receiving tips directly from riders.

Uber has an “onboarding” process drivers must participate in before they can begin driving with the Uber app.  This process may include tips from Uber on how to keep satisfaction ratings high and a city knowledge test.  Uber conducts a background check on each driver too.  The type of vehicle the driver uses may also be subject to some requirements from Uber.  Uber and the potential driver execute an agreement setting forth the terms of use of the Uber App and their relationship with Uber, and several different agreements have been used by Uber over the years.  Drivers may be deactivated from Uber for a variety of reasons, such as failing to maintain a valid driver’s license, posing a safety risk, or scoring poorly on the driver rating system.

As I mentioned previously, it is up to the driver how much or how little he or she uses the app.  In fact, the driver may even cancel a request if the rider is aggressive or intoxicated.  Uber does not prohibit drivers from using other “lead generation applications” nor does it track whether its drivers do use them.  Uber does not reimburse drivers for expenses like gas, mileage, or cell phone usage.  Under the rating system, the rider scores drivers on a scale of one to five stars at the completion of the ride.  Uber does not make any recommendations in this rating system.

When looking at everything, a number of facts support Uber’s defense of classifying its drivers as independent contractors.  For instance, employers dictate how work is to be completed.  Uber does not tell drivers what routes to take or limit the territory in which they may drive.  It does not tell drivers what amenities to provide to riders, if the driver wishes to make such offerings.  Also, employers usually provide equipment to their employees or, at least, their investment tends to be greater than that of employees, but Uber does not own any vehicles and instead simply licenses the use of its software.  The drivers own the equipment for transportation of riders – undoubtedly a major investment, and one which Judge Chen noted weights in favor of the existence of an independent contractor relationship.  The Court stated that it had already found Uber is a transportation company, so the most significant investment is the one made by the drivers – a vehicle.  However, that finding also meant that the drivers perform work that is an “integral part of” Uber’s business – an indicator of an employment relationship.  Moreover, employers commonly evaluate the performance of their employees.  Uber does not evaluate the performance of its drivers – only the riders do that.  Finally, employers tend to schedule the work employees perform.  Drivers for Uber, on the other hand, decide when they will work, how long they will work, and who they will drive.  This type of discretion is not typical for an employee.

Weighing against Uber is the fact that drivers do not set the rates charged to riders.  Uber also sets the surge pricing.  Uber does require the vehicles used by drivers to meet certain standards, as I mentioned.  It also exercises substantial control over the selection of its drivers, including the qualifications they must meet, and requires the successful completion of a background check, a city knowledge check, vehicle inspection, and a personal interview.  Certainly, drivers are an indispensable part of the Uber service, as Judge Chen noted.  Lastly, Uber regularly terminates drivers.

The attorney for the suing drivers, Shannon Liss-Riordan, has taken the position that it doesn’t matter if the drivers want to be treated like independent contractors.  Her focus is whether Uber is complying with the law.  “This is not a popularity contest.  It’s not a question of what people want,” Liss-Riordan has been quoted stating. 

Vanessa’s Views on the Uberization of the Independent Contractor Relationship

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

                                    ~ The Declaration of Independence ~

I’d like to make a point by playing Fill In The Blank.  This is not a popularity contest.  It’s not a question of being able to feed your family.  It’s not a question of being able to get an education and making the rent.  It’s not a question of countless sleepless nights worrying how you will pay the bills.  It’s not a question of pulling yourself out of poverty by holding down two jobs.

Is the litigation in California really about Uber complying with the law?  Because the arrangement these drivers have permits them to exercise their “unalienable Rights”.  Each one has a shot at a better Life through the extra income earned driving for Uber.  Think about those people who hold down two jobs, juggling endless scheduling hassles, and never getting to spend time with their loved ones.  Uber gives those people the Liberty to have one job and supplement their income driving at times most convenient for them – like when their children are in school.  And as for Happiness, I love what it does for me – the rider.  I can go out to dinner in a strange city knowing that I won’t have to wait for a cab for 30 minutes by myself.  Once I push that app button, I don’t even have time to run to the restroom.  Yes, those drivers are Happy they get to see their kids playing sports.  I’m certainly Happy that I can get a ride anywhere FAST!  So, if what Uber is doing is illegal, then let’s do the right thing and change the law.

That’s the rub in a lot of independent contractor determinations.  Judge Chen could not say that Uber was acting illegally as a matter of law.  Under the current test, it’s very difficult to make this determination.  A business has the right to ensure some quality control and some consistency under its brand without turning everyone into employees.  The National Labor Relations Board may not see it that way these days, if a recent decision of theirs is any indication, and with unionization of Uber drivers just beginning to take hold (like in Seattle, Washington), Uber’s impact on and influence from traditional labor law is a topic for another day.  At bottom, finding the line in the sand where this exercise of control, or the right to exercise this type of control, crosses into dictating the means, mode, and method of performing a job is tremendously difficult.

In my view, control is the key.  The WHD tries to distance itself from the control factor, stating that it is no more important than the other factors in classifying workers.  That’s not the case in West Virginia and a lot of other states under common law, where control is, in fact, the key.  What is the purpose of the Uber driver?  To get a rider from point A to point B safely, efficiently, and pleasantly as possible, right?  Uber does not dictate these details nor does it retain the right to control these details.  I smell independent contractor.  Why can’t we ask this question of every challenged relationship?  What is the purpose served by the employee who works at McDonald’s?  I would posit that it is to provide me with yummy ice cream cones as expeditiously as possible.  If you look on the ice cream cone machine at the McDonald’s where I take my business, you will see a diagram dictating exactly how tall my tasty treat should be.  That’s the hallmark of an employer/employee relationship.  Control.  Of course, whether that control comes from a McDonald’s franchise owner or the corporation itself is a separate question (and one also in the news lately), but the focus of the entire concept is governing the details.

I would also like to point out that a performance evaluation is indispensable to the employer/employee relationship (and to the question of who has the control).  I evaluate the performance of my Uber drivers, and that’s not an illusory act.  Once, I had to use my phone to navigate my driver to a significant college not far outside of Boston.  Because he had no idea what he was doing, I was late for my appointment.  As I rushed off, my driver waived me back as to ask, “Where’s Boston?”  We were 14 miles outside the city, and he had a smartphone.  I gave him the lowest rating possible, and I’ll bet he was not working for Uber a week later, nor should he have been.

I think back to one of my cab rides in NYC.  The taxi stank.  The driver was rude.  He ripped me off by taking the longest route possible.  There were no seatbelts in the cab, so my friend and I would slide back and forth across the back seat while he squealed around corners.  I thought we would be in a horrific accident more than once on a 15 minute ride.  If I called the taxi company to complain, I know for a fact that driver would not be in danger of losing his job.  I’m nothing to him or his employer because I’ll be gone in a few days.  An Uber driver has the incentive to make my ride as pleasant as possible, and the discretion to do it as he sees best. Ah, the Pursuit of Happiness.

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Vanessa Towarnicky's primary focus is in the area of labor and employment law. She has been involved in representing clients in various employment cases, including sexual harassment; deliberate intent; age, race, and disability discrimination; wrongful discharge; and various other employment-related torts. She is admitted to various state and federal courts as well as the Third Circuit Court of Appeals and Fourth Circuit Court of Appeals.
 
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