Employment Law – Uber lawsuit on whether drivers are employees or independent contractors may change the Sharing Economy

Uber has gone from officially launching service in 2011 to being valued at up to $51 billion as of July 2015.  It is the most famous example of the growing number of companies that is part of the “sharing economy.”

However, Uber’s business model may change depending on the outcome of some ongoing lawsuits that involve the determination of whether Uber drivers are employees or independent contractors.

In California, the determination of whether a worker is an employee or an independent contractor is a two-stage analysis.  The first stage is whether there is evidence a worker provided services for an employer.  The second stage is whether the employer can prove the worker is an independent contractor.   A variety of factors help determine whether a worker is an independent contractor, the most important of which is the employer’s right to control work details or whether the employer retains all necessary control over the worker’s performance.  The right to control is more important than how much control an employer actually exercises.   An employer’s right to discharge at will, without cause, is strong evidence in support of an employment relationship.

Other factors include whether the one performing services is engaged in a distinct occupation or business; whether the occupation is usually done under the direction of a principal or by a specialist without supervision; the skill required in the occupation; whether the principal or worker supplies the tools and place of work; the length of time the services are to be performed; whether payment is by time or by the job; whether the work is part of the regular business of the principal; and whether the parties believe they are employer and employee.

In the pending O’Connor class action case against Uber, the court found Uber is a transportation company for which their drivers provide services for Uber.  Uber sets the fares it charges riders unilaterally.  Uber prohibits its drivers from soliciting rides from User riders outside the Uber app.  Uber exercises substantial control over the qualification and selection of its drivers.  Uber regularly terminates the accounts of drivers who do not perform up to Uber’s standards.  Uber receives a percentage of each fare its drivers earn.  Based on this, the court ruled the question of whether an Uber driver is an employee or independent contractor is one that must be decided by a jury.

For more on this case, see this website operated by the attorneys for the Plaintiffs in the O’Connor case, a response from Uber to recent court rulings on lawsuits against Uber, and this Wired Magazine article on the Uber lawsuits.

Finally, this is information from the California Department of Industrial Relations on how to tell if you are an employee or independent contractor.

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