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California Overturns Uber's Appeal: Its Drivers Are Employees, Not Contractors
An anonymous reader writes: Uber's third attempt to overturn a California court ruling stating that its drivers are employees and not contractors has ended in failure, with the appeal dismissed by the California Employment Development Department (EDD). The California Labor Commission ruled in June on the matter, and in a later appeal one judge effectively decided that the difference between 'firing' a driver and deactivating their account is purely semantic.
A court ruling that helps labor! Better go buy a lottery ticket, these things come around only once every hundred years!
and Florida, right, that liberal state down there.. Or did you not read the article?
Does EBAY, facebook, or youtube prevent you from selling your products if they dont like who you are selling them too? Or dont use specific things? methinks you did not read the article.
When you cant win, ad hominem.
A root of this issue is the 18th, 19th and 20th century concepts of employees / employers and an outdated set of definitions. Like so many modern issues near and dear, we will have to reassess out fundamental assumptions about all kinds of things, this being just one.
If I set my own schedule, and take as much time off as I choose, am I under an employer's control?
Can robots marry humans, and why would they want to aside from Scarlett Johansson?
Do women have the right to choose... how their FICA retirement savings is invested?
Pretending this is my office full of bitter coworkers..
.... because an employer wasn't charging them, how is a former employee supposed to collect EI?
File under 'M' for 'Manic ranting'
Only if eBay is telling you what computer to use, when to use it , when you can list and what you can charge. Oh and they can dictate that you are not allowed to use competitive services while listing an item on their site. Not sure how Facebook and YouTube fit into this as they are services that you use for free via advertising.
False dichotomy. Many employees do not get benefits.
The real "Libtards" are the Libertarians!
Benefits is not the only distinction. I don't know the laws, but there are things like working full time and working for (or providing service to) only one company that make it murky. If Uber drivers drove for other companies as well the case might be different. Also, Uber provides insurance, which might be considered a benefit.
Personally, I think if a person wants to be a contractor and sets up his own business, he should be a contractor no matter what. But the law seems to not operate that way.
There are many reasons why drivers should be classified as employees rather than as contractors. The most obvious is that drivers don't price their own services. The labor laws were specifically written to protect people who are working for much more powerful companies which will treat them as serfs if they can get away with it.
"He took a duck in the face at 250 knots." -- William Gibson, Pattern Recognition
According to the administrative law judge who heard the first appeal, Uber has sole discretion over fares, and can charge drivers a cancellation fee if they choose not to take a ride, prohibit drivers from picking up passengers not using the app and suspend or deactivate drivers' accounts. Based on that, "there was in fact an employer/employee relationship", according to the decision.
I don't know if that is sufficient argument to make someone an employee in the US (for purposes of taxation / benefits), but this is about there being an employer/employee relationship, which is not the same thing. There's a similar distinction here in the Netherlands, where freelancing is becoming rather popular. Internal Revenue considers someone to be a contractor ("entrepreneur") if they are free to set rates, and perform their assignments as they think best. If a client or an agency sets too many conditions and rules, the tax office may decide that there is in fact an employer-employee relationship. That doesn't make the contractor an actual employee, but it does entitle him for benefits, and also makes him and the employer liable for social security taxes.
If construction was anything like programming, an incorrectly fitted lock would bring down the entire building...
... "no Uber for you" - they can simply stop operating in California. They'll still owe all of their former "contractors", er, I mean, former employees back pay and may have to pay unemployment compensation, but it will eliminate the problem going forward, at least in California.
As far as other states and countries, "lather, rinse, repeat" and only stay in business in places that allow you to function using your business model.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
If the distinction "is purely semantic", then it is actually meaningful. That's not what you're trying to say, is it?
>What's the difference between an employee and a contractor?
1) The amount of tax paid by the payer and the worker.
2) Employer provided health insurance.
3) Local bureaucratic procedures differ a lot between employing an employee and paying a contractor (It's easier with a contractor).
I should use this sig to advertise my book ISBN-13 : 978-1501515132.
This is probably an attempt to make Uber bear a bigger burden in terms of being forced to include the drivers on their payroll.
Anyone who accepts restrictions from a company and yet doesn't want full labor protection of an employee is either totally naive about how tenuous their situation really is, or is experiencing desperation brought on by a totally shitty economy. Either way, I applaud the California decision, because corporations should not be taking advantage of either.
Laws are rules for the court, but merely a bottom bar to hit for life. Think beyond laws in your actions always.
Easier said than done. If you stop doing business in California now, wouldn't you have to pay "severance" to all your "employees"? Besides, stopping doing business in protest is not the business-like thing to do. Working around the legislation is the business-like thing ;)
Personally, I think if a person wants to be a contractor and sets up his own business, he should be a contractor no matter what.
The issue here isn't about the degree of freedom from government interference a person has — it's how the regulations work when the client/employer (whichever the case may be) imposes too many restrictions on how the contractor/employee can do his or her job. In this case, Uber has been dictating too many terms to their contractors, to the point where the state of California determined that they were playing semantic games by using the word "contractor," i.e. the relationship they imposed on their drivers was employer-employee.
If you believe that ideally the relationship should have been client-contractor, that's not an issue of the law but rather what Uber feels it is within its rights to restrict. And ultimately that would require increased government regulation to change the contracts Uber writes, given that it is apparently unwilling to treat its drivers like actual contractors with the liberties that come with actually operating one's own business.
There are other differences as well. A contractor may hold many contracts simultaneously and sub-contract work. Would Uber allow me to have a fleet of vehicles and drivers or to provide services to both them and a local competitor?
[anarcho-capitalist]
But they're on the INTERNET, so they're the same thing and your normal laws don't apply.
[/anarcho-capitalist]
Go on, citizen, stamp the vote card. R or D, your choice.
You're applying the logic backwards. Contractors do not receive benefits *because they are contractors*. The definition of a contractor according to the state of California: " 1. Whether the person performing services is engaged in an occupation or business distinct from that of the principal; 2. Whether or not the work is a part of the regular business of the principal or alleged employer; 3. Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work; 4. The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers; 5. Whether the service rendered requires a special skill; 6. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; 7. The alleged employee’s opportunity for profit or loss depending on his or her managerial skill; 8. The length of time for which the services are to be performed; 9. The degree of permanence of the working relationship; 10. The method of payment, whether by time or by the job; and 11. Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests." Uber pretty clearly violates 1, 2, most of 3, 6, and 7. Arguments can be made on others. A follow-up states: "Even where there is an absence of control over work details, an employer-employee relationship will be found if (1) the principal retains pervasive control over the operation as a whole, (2) the worker’s duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary. (Yellow Cab Cooperative v. Workers Compensation Appeals Board (1991) 226 Cal.App.3d 1288)" In this case, designating drivers as contractors is explicitly to get around legal requirements, such as needing to insure the drivers as commercial operators, being responsible for criminal actions of drivers during rides, paying employment taxes, etc. Some of those requirements are specifically created for exactly this kind of business activity (namely, taxi service), so in effect Uber wants to operate in a privileged position in an existing business environment for the reasons of "because". This is roughly analogous to so many companies designating IT workers (especially programmers) as "salaried exempt" in order to get around overtime laws. That went on for years until a few high-profile cases (specifically IBM) finally scared employers into obeying the law. Employers - or contract negotiators - don't get to decide these things unilaterally.
Well, not 100% true.
1. You pay the same tax for the most part, the big difference is, as a contractor, you have to wear your Big Boy pants and plan to save to pay tax owed, since it is not taken immediately out of your paycheck before you get it. That being said, one benefit as a contractor is you can write off a lot of stuff, which in the long run, does enable you to keep more of your pay from the tax man...it does, however, require you to do a bit more paperwork and be responsible for records and money management. I personally find the effort more than justified.
2. As a contractor, you are an employee of your own company, therefore you provide your own insurance...you're company your insurance. The thing is, as a contractor, you negotiate your bill rate to count for this expense....much like a W2 employer pays you less per hour since they are picking up the benefits tab...as a contractor you CHARGE more so that you can pick up the tab.
3. Yes...I dunno why they make it so hard to be a contractor. Shouldn't it be up to the individual to be what they want to be? Personally, I find it best to negotiate my worth with the employer, and find a $$ amount we are both satisfied with. I also like the broader choice I get in how to manage my money, HSA, and retirement. I'm adult, I can make my own decisions thank you. Why not make it easier for folks that can take care of themselves to do just that?
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
Major differences are (at a minimum):
Employees have state, local, federal tax, FICA, and unemployment insurance tax, withheld from their compensation. Employees are covered by unemployment insurance. The employer has other liability issues they must cover themselves for (such as workman's comp).
Additionally, the employer matches dollar amount of the FICA withheld and generally pays the majority of the costs associated with unemployment insurance.
Most of the time an employee costs 30%-50% more than the amount you directly compensate them for.
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There are all sorts of arguments about why Uber should or shouldn't have to act like a traditional taxi company. But in my opinion, that's less important than this question, for the broader economy and labor force. Social media, tech publications, and even the MBA rags have had all sorts of glowing stories about the "gig economy." Basically, they argue that the flexibility offered to workers by allowing them to string together contract jobs to make income outweighs the stability of traditional employment. Uber is cited as an example on the low end, day laborer style side, and of course, high flying "technology consultants" making $150+ an hour are put up as shining examples of why this should be the future of employment.
I'm far from a Luddite, but I'm a big believer in stability. Especially as you acquire a family and grown-up responsibilities, life in the US revolves around a steady income, health insurance and a way to save for retirement. The high-flying tech consultants can arrange for these things, but lately I've been seeing more of these cheerleading articles advocating for all employees to switch to this model. Most average employees don't have the motivation or skills to market themselves the way these consultants do, and they may lack the skills that would make them good contractor candidates.
It just seems to me that companies want a disposable labor force that they don't need to pay benefits, vacation, etc. for. Basically, they want to go back to a pre-Depression era where workers just turn up at the factory gates every morning and hope to get work. That may be appealing to Millenials who don't have any family ties and will move at the drop of a hat. If we have to go this way, then things like real estate transactions need to be streamlined, life has to be restructured around variable income levels, etc. and I think society isn't ready for it yet.
I don't see how uber could stop you from also having another job.
Uber wants all the benefits of being an employer with none of the responsibilities.
If you listen to Uber, every worker is an independent contractor and all the employee protection laws we fought so hard for over the last century don't apply any more.
What article?
You're applying the logic backwards.
That was intentional (although I don't agree that the "backwardedness" makes it incorrect).
(P implies Q) implies (!Q implies !P)
If being an employee implies that you have benefits, then not having benefits implies that you are not an employee.
All I am saying is that the *fact* that they do not receive benefits is different than whether they *ought* to receive benefits (which is what the court seems to be arguing).
This is roughly analogous to so many companies designating IT workers (especially programmers) as "salaried exempt" in order to get around overtime laws. That went on for years until a few high-profile cases (specifically IBM) finally scared employers into obeying the law. Employers - or contract negotiators - don't get to decide these things unilaterally.
I am currently a salaried exempt programmer, and as far as I know our company (which is a defense contractor) is operating within the law. Furthermore, I am quite happy with this arrangement. It focuses my attention on completing tasks rather than on working hours. I have a very flexible work schedule, and do not frequently need to work more than 40 hours per week. If I happen to pull a really long week (e.g. 48+ hours), it is customary to take a day off the following week. I like really like this arrangement as it gets more work done (when it needs to be done by) for basically the same amount of effort.
AC brings up a good question. If I'm selling for Mary Kay, Avon, or god forbid AmWay, I'm not employed by those companies (?)....but they do set the guidelines on the price of their products and the guidelines. How does Uber differ in this situation according to California law?
If you post as Anonymous Coward, don't expect a reply.
That's a difference between being classified as one or the other by a company. But the companies classification is not the determinant. There are rules that classify you as one or the other.
It's not normative vs. descriptive, it's declared vs. actual.
Your ad here. Ask me how!
but this is about there being an employer/employee relationship, which is not the same thing.
I don't find the evidence for an employer/employee relationship as cited in the article to be more convincing than the evidence for a contractor relationship. Uber offers jobs to people explicitly as non-employees (and without any of the benefits employees are entitled to), and those people agree to those terms.
I agree that there is an incentive for employers to convert their workforce to contractors rather than employers (i.e. because you don't have to pay benefits), but traditionally employers also had to pay contractors more money to compensate for the lack of benefits, job security, etc. Are uber drivers better off being employees? Those benefits would likely come with a pay decrease, and maybe less flexible schedules.
Internal Revenue considers someone to be a contractor ("entrepreneur") if they are free to set rates, and perform their assignments as they think best.
An uber dirver is free to "set rates" in the sense that they can decide not to drive their car when rates are low. All actual "rates" are an agreement between 2 parties. If either side does not agree on the rates, then the contracted labor doesn't happen.
If a client or an agency sets too many conditions and rules, the tax office may decide that there is in fact an employer-employee relationship. That doesn't make the contractor an actual employee, but it does entitle him for benefits, and also makes him and the employer liable for social security taxes.
I agree that this is true, but it does seem rather arbitrary to me. I am a proponent of the free market, but I do accept that people are often irrational. That said, I think the "solutions" to the problem of the irationality of people are often poorly thought out and often just make things worse.
I like the idea of creating a special class of people (employees) that have a common mechanism in regards to taxes, benefits, etc. It theoretically should reduce paperwork and increase efficiency which is good for everyone, but if companies are trying to avoid this classification, that theoretically should be less work, something is wrong with the system.
While you are correct that not all employees get healthcare benefits (what is usually referred to as "benefits"), all employees get some benefits, which contractors do not. For example: social security contributions (which raise your rate in retirement), workers-comp insurance, and unemployment insurance. All of these things cost employers money, but the law assumes contractors will pay for themselves.
This is what Uber has been fighting so hard to avoid paying.
So, like, everywhere as they seem to be having legal issues everywhere.
Don't fight for your country, if your country does not fight for you.
What's the difference between an employee and a contractor? The contractor doesn't receive any benefits.
Oh wow, that was stupid. Using that line of argument a part-time employee is a contractor because he/she does not get benefits usually given under the law to full-time employees.
While you are correct that not all employees get healthcare benefits (what is usually referred to as "benefits"), all employees get some benefits, which contractors do not. For example: social security contributions (which raise your rate in retirement), workers-comp insurance, and unemployment insurance.
Err no, unless we are talking as corp-to-corp contractors, contractors typically get those benefits through their contracting agencies. The majority of contractors in numbers similar to Uber's do not work corp-to-corp.
All of these things cost employers money, but the law assumes contractors will pay for themselves.
This is what Uber has been fighting so hard to avoid paying.
Correct. Uber's accounting/labor farce is over me thinks.
Working around the legislation is the business-like thing ;)
No, the business-like thing is to embrace regulation and turn it to your advantage, the way the taxi companies are seeking to do. Life's a lot easier if you can get government to shut down potential competitors.
It's not normative vs. descriptive, it's declared vs. actual.
Those 2 dichotomies are not mutually exclusive.
I agree with the judge on one point: if they were independent contractors, they would be free to pickup passengers not using Uber.
I've heard of drivers keeping 3 phones and having Uber, lyft, and sidecar all up and running at the same time. With a driver doing that you would indeed have a good argument that he's a contractor.
But many/most don't do that.
I don't read AC A human right
They simply fixed the glitch..
To Copy from One is Plagiarism; To Copy from Many is Research.
You really like to take your labels literally. I would suggest maybe trying to think about what is actually going on rather than just accepting labels at face value.
The company and its franchisees pull the independent contractor status all the goddamned time while doing all they can to violate California law - charging you for uniforms (illegal under CA law) deduction of tips from credit card purchases (illegal just about anywhere) refusal to pay mileage reimbursement (IRS law violation) and much, much more.
John Schnatter is a class-A business criminal and needs to be taken to task by the courts.
Still waiting on Serviscope_minor to wake up to fucking reality and realize that Jessica Price isn't going to fuck him.
Also if they get caught by Uber they may be fired.
When did America go from the land of opportunity to the land of jobs we are forced to settle for?
Laws are rules for the court, but merely a bottom bar to hit for life. Think beyond laws in your actions always.
I agree that this is true, but it does seem rather arbitrary to me. I am a proponent of the free market, but I do accept that people are often irrational. That said, I think the "solutions" to the problem of the irationality of people are often poorly thought out and often just make things worse.
The federal and California governments have a *general* policy that they want most workers to be employees, especially low level workers, because being a proper individual contractor is actually fairly complicated tax wise, and low level workers are the most likely to not realize things like the increased social security cost, meaning they're making less money than they thought they would, in addition to extra expenses like insurance.
Uber will probably be able to change this designation by changing up their terms of service a bit - giving more freedom to the drivers.
I don't read AC A human right
If the "contractors" were actually contractors, then it would be them and not Uber serving street hails.
Gypsy cabs are illegal. Answering street hails would make them a gypsy cab. As long as they are a contractor, they are shielded.
The summary is BS. This is *one driver*. Not "Uber drivers".
The decision is also BS. for other reasons, but there's a $12.50 per driver way to work around the ruling, and I expect Uber will vail itself of that option.
I don't disagree that there are probably a lot of people driving for uber that think they are making more money than they really are for the reasons you cited. But these are the same people that don't have savings accounts, use payday loan services, only pay the minimums on their many credit cards, etc. I don't know that more regulations is really going to do these people any more good. I feel like the best way to educate people is to let them learn a few lessons the hard way.
Furthermore, if uber can leverage the ignorance of people in regards to what is involved with being an independent contractor, it means the government is not doing a very good job in enforcing those regulations. I got tricked in my 20's when my employer switched me to being a contractor, and the IRS came after me for back taxes 3 years later.
Many employees do not get benefits.
It's not a dichotomy. Benefits are one factor tending to show that a person is an employee. Employee and independent contractors is not a black-and-white status, it's a sliding scale.
Fast Federal Court and I.T.C. updates
Seems like I meet the criteria.
Some drink at the fountain of knowledge. Others just gargle.
California needs to tax the crap out of, drive the business out of California in order to make California the Liberal Utopian society.
I've been hearing this crap my whole life. Yet it's still one of the strongest economies on the planet and it's always the "Liberal" governors that balance the budget. I hope you find a Libertarian/Conservative/Whatever utopia that floats your boat. Personally, I think regulations are like code. Bloat is bad, but good luck doing anything worthwhile with no-code.
Some privacy policy Slashdot.
With those scams, you are independent because you are responsible for finding the customer.
Does Uber prevent you from driving people around without using Uber?
What's the difference between an employee and a contractor? The contractor doesn't receive any benefits. Since the uber drivers do not receive benefits, they are contractors. This seems like a problem of normative vs. descriptive (is vs. ought) claims. The uber drivers are contractors that don't recieve benefits vs. The uber drivers should receive benefits and therefore be employees.
Let me guess, you're not a lawyer are you?
To have a right to do a thing is not at all the same as to be right in doing it
Personally, I think if a person wants to be a contractor and sets up his own business, he should be a contractor no matter what. But the law seems to not operate that way.
The point about employee status is that a lot of people WANT to be a contractor, because it has numerous tax advantages, and especially in the US there is no huge advantage in being an employee in terms of labour protection laws, entitlement to sick benefit, paid pension provision or sensible amounts of annual leave, and so on.
Setting up your own business in itself is a strong indication you will be a contractor for tax purposes, but not necessarily if you only work for one employer, and so on.
To have a right to do a thing is not at all the same as to be right in doing it
It's the right decision under current law, but it's obvious that what we need is laws setting up a third class of workers between contractors and employees.
You want a special category of person because they are an Uber driver?
How about conee?
To have a right to do a thing is not at all the same as to be right in doing it
Uber is about to get hit with unpaid employee taxes from the IRS because of this. The IRS has a list of 20 points that separates contractors from employees. Uber violates about half of them. Also, employees get mileage and overtime, some folks are about to get paid then fired when Uber goes out of business.
No, I'm suggesting that those like uber drivers, task rabbit workers, etc. are more attached than contractors but not really as attached as full employees. They should get a set of benefits and protections somewhere between the two. The same could be said for teenagers, they're not really children, but they're not really adults either and the law should reflect that.
So, in 2009, the drivers of USA Cab in California were not qualified for a class action status lawsuit since they acted like independent contractors and their damages were not universal enough to qualify for Class Action. http://www.vtzlawblog.com/2009... Yet, Uber drivers are even less under the control of Uber, and they're considered Employees. The whole thing smells funny.
In general, if you sell for Avon, you decide on your own operations. You are free to sell anything at any time to anyone. As I understand it, you buy the stuff from Avon and sell it, so that you run the finances. (This changes with the MLM operations, which are typically scams.) A Uber employee sets his or her own hours, but within that context operates as instructed by Uber and is paid by Uber.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
Let me guess, you're not a rocket scientist are you?