Uber and California labor laws

Uber and California labor laws

Uber California must be in a tailspin. Speculation is running wild about the implications of this week's ruling by the California Labor Commission that Uber drivers are employees, not contractors. To me, it's another case where a better dispute resolution process could have kept a molehill from becoming the mountain that it is now.Initially, this was a case that was just about getting paid for services rendered, not about employee classification. A disgruntled Uber driver, Barbara Berwick, filed the claim because the company failed to pay her for her driving services during a three month period last summer. However, the Commission - like the proverbial camel with its nose in the tent - took it as an opportunity to examine the larger question of whether Uber's drivers are so essential a part of its business that they should be classified as employees, not contractors. In the essence of its ruling, the Commission concluded that

"Defendants are in business to provide transportation services to passengers. Plaintiff did the actual transporting of those passengers. Without drivers such as Plaintiff, Defendants' business would not exist."

Right now, the ruling only affects Uber drivers in California. But California is the company's home base, with more drivers there than in any other market. Furthermore, California labor law tends to lead precedent elsewhere. You can be sure that Uber's lawyers right now are shopping the world's best attorneys and the world's most favorable courts in their frantic rush to appeal. The cost implications to Uber are enormous, if they have to take on the overhead costs of taxes, benefits and HR administration for hundreds of thousands of newly classified "employees." Their lofty $4 billion valuation will plummet like a stone if they can't get this ruling overturned.The ruling could ultimately reach farther than Uber. Every company that's built itself on this freelancer model of service delivery has got to be nervous that it will happen to them too. It could be signaling the start of an emergent legal trend that warrants close ongoing scrutiny for any company operating within the Freelance Economy.My advice to all of them is - make sure you keep your contractors happy, pay them on time, and settle all disputed claims quickly. Otherwise, you're giving more activist judges and commissioners the chance to look behind your closed doors, and they may not like what they see.

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