The Stack Archive

Uber’s business model threatened in the U.S. in fresh California ruling

Thu 10 Sep 2015

California-based ‘ride-sharing’ giant Uber has lost another crucial legal round in its home state regarding whether or not it can be classified as an ‘employer’ under U.S. law. So far the California courts have responded ‘Yes – you are’ to that question, despite the company’s protests that its drivers prefer to have the ‘freedom’ of contractor-status.

According to the California Employment Development Department (EDD), the ex-Uber driver who has taken his former…errr…contract provider to court for unemployment benefits has a valid case, despite the $50bn company’s protests and two failed attempts to overturn the EDD’s ruling at the end of last year.

During his deliberations on Uber’s first appeal of the decision one judge decreed that the level of control the company retains over its drivers, including the ability to ‘punish’ drivers by charging them a cancellation fee if they decline to offer a ride, does not allow Uber to distinguish itself from any other employer imposing terms on its workers. In this sense ‘deactivating’ a driver’s account can be taken as a sophist attempt to re-define ‘firing’.

As usual Uber is on a fire-damage campaign after the defeat, noting that the latest decision holds no ‘formal or binding precedent’. After we reported on June’s ruling Uber spokeswoman Trina Smith contacted us in a widely-distributed press-directed email stating:

The California Labor Commission’s ruling is non-binding and applies to a single driver.  Indeed it is contrary to a previous ruling by the same commission, which concluded in 2012 that the driver ‘performed services as an independent contractor, and not as a bona fide employee.’  Five other states have also come to the same conclusion.  It’s important to remember that the number one reason drivers choose to use Uber is because they have complete flexibility and control.  The majority of them can and do choose to earn their living from multiple sources, including other ride sharing companies. We have appealed this ruling.”

And now the result is in. It should be noted additionally that seven U.S. states currently agree with California on this matter, including Illinois, Indiana, Pennsylvania, Colorado, Texas, New York and Georgia. On September 1st U.S. District Judge Edward Chen decreed, from Uber’s home city of San Francisco, that class-action lawsuits can be brought against Uber, but that drivers who began work for the company after May of 2014 will need to specifically opt out of an arbitration agreement with which Uber seems to have tried to obviate class-action suits.

There is only theory and speculation at the moment as to what impact the unwanted ‘legitimisation’ of Uber would have on its U.S. operations and on those of similar ‘sharing boomers’ which have found rapid wealth and success by leveraging the demographics of a growing Stateside sharing economy. It does seem likely that the widespread ratification of the California courts’ ruling over the next 18 months could find Uber’s ‘free ride’ coming to an end where it began.

Still, prophets are never appreciated in their own country, and the war of Uber’s global domination campaign is not yet lost, despite fresh conflict on an almost-daily basis with authorities in regions it is trying to conquer.


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