Written by Jessica Catlow
Market disrupters always make news. Uber, which claims to be a tech company, created a smart-phone application that connects drivers of “black cars”, or livery cars, with passengers, and processes the payment with the passenger’s pre-registered credit card, all in exchange for 20% of the fare. Of late, Uber has been in the news most often because of its “surge pricing” model. As demand picks up, so do the fares. Uber claims the increased price in times of high demand encourages drivers to get on the roads – i.e., to increase supply at the right moment and therefore increase market efficiencies. During a snow storm recently in New York however, (and on New Year’s Eve, or other similar high demand times), this pricing model has frustrated a number of passengers. Most publicly, Jessica Seinfeld posted a Tweet of her $415 fare to bring her kids to a bar mitzvah at another Manhattan location.
Unfortunately, or fortunately, no celebrity or spouse of celebrity has taken to Twitter about another dispute plaguing Uber: in December 2013, a federal judge in San Francisco refused to dismiss a class action lawsuit brought by drivers against Uber claiming Uber misclassified them as independent contractors, kept a portion of their tips, and refused to reimburse them for business expenses as required under California law.
Human resource professionals and employment law practitioners know well that the hallmarks of an employment relationship are direction and control and the employee’s lack of entrepreneurial risk. The drivers claim that they are employees because they “are required to follow a litany of detailed requirements imposed on them by Uber and they are graded, and are subject to termination, based on their failure to adhere to these requirements (such as rules regarding their conduct with customers, the cleanliness of their vehicles, their timeliness in picking up customers and taking them to their destination, what they are allowed to say to customers, etc.” Uber claims that the drivers are not employees because the drivers supply the instrumentalities of their work (i.e., the cars), they are paid by the job, and because Uber has no control over the drivers’ hours, which geographic area they target for pickups, and whether they choose to accept a passenger’s request for a ride. Uber claims it is a tech company merely facilitating the connection between drivers and passengers. The drivers claim that Uber is in the business of providing car services to customers – and that they are integrated fully into that business.
The court allowed the case to go forward because the drivers’ allegations in their complaint were sufficient to state a claim that they are in employees, even if it is ultimately determined later that Uber does not in fact exercise the requisite direction or control over the drivers such that Uber properly classified them as independent contracts.
Stay tuned. This will be an interesting case to watch. As we all know, the determination of whether a person is properly classified as an independent contractor is highly fact dependent, and, oftentimes, there is so much gray that ultimately it will be a matter of judgment and an employer’s appetite for risk. The ultimate disposition in cases like Uber will serve as a further guidepost in that decision making process.