One of the most significant issues on the workers’ comp horizon is how the courts will deal with the so-called “new economy”. What are the requirements for workers’ comp coverage in the “shared economy”?
Uber, the most prominent of the new “shared economy” employers, is hitting some legal speed-bumps.
Uber, of course, is just one of many “shared economy” startups. The business models vary somewhat, but companies such as Task Rabbit, Lyft, Postmates, Handy.com, SideCar and Zirx tout that they provide workers flexible hours and autonomy.
Like many urban dwellers I know, I have an Uber app on my iPhone and occasionally use the service. An Uber driver recently ferried me from Carnegie Mellon University to the Pittsburgh , Pa. airport. The driver, a recently discharged vet, was working part time while looking for a regular gig and was grateful to have the income and flexibility.
And the idea of outsourcing certain time consuming personal errands to shared economy workers has a great appeal to this busy lawyer.
But is the Uber-style business model on shaky legal ground?
A June 3, 2015 ruling by the California Labor Commissioner in the case of Berwick v. Uber (see link to the actual decision at the end of this post) finds that Ms. Berwick was an employee of Uber, not an independent contractor. The analysis relies in part upon a 1991 workers’ comp case, Yellow Cab Cooperative v. WCAB, 226 Cal. App. 3d 1288.
In so holding the Labor Commissioner noted that it is not necessary that a principal exercise complete control over a workers’ activities in order for the worker to be deemed an employee. The Labor Commissioner determined that :
“By obtaining the clients in need of the service and providing the workers to conduct it, Defendants retained all necessary control over the operation as a whole.”
In the view of the Labor Commissioner,
“Plaintiff’s work was integral to Defendant’s business. Defendants are in business to provide transportation services to passengers. Plaintiff did the actual transporting of those passengers. Without driver such as Plaintiff, Defendant’s business would not exist.”
Ms. Berwick was awarded monies for expenses, but Uber has appealed to the San Francisco Superior Court.
Meanwhile, Judge Ed Chen, U. S. District Court Judge in San Francisco, rejected a motion for summary judgement filed by Uber in a class action case (O’Connor v. Uber) which asserts that Uber workers are employees, not independent contractors.
Chen’s March 11,2015 ruling (see bottom of this post) goes into much more detailed legal analysis than the ruling from the California Labor Commissioner. Chen held that “as a matter of law” Uber drivers render service to Uber and “thus are Uber’s presumptive employees.” Therefore, according to Chen, the burden shifts to Uber to disprove that an employee relationship exists.
Chen noted that Uber was not entitled to summary judgment because material facts remain in dispute and “a reasonable inference of an employment relationship may be drawn”. Therefore, Chen ruled, the O’Connor v. Uber issues involve mixed issues of fact and law and should proceed to trial.
If there are pending cases at the California WCAB involving employment vs. independent contractor in “shared economy” cases, I’m not aware of them. But it won’t surprise me if we see such cases filed soon, so the WCAB may eventually weigh in on the issue as well.
If the Uber “independent contractor” model passes muster, look for many efforts to “disrupt” various industries, with consequences for California’s workers’ comp system.
With Uber facing significant legal challenges in multiple forums, it is likely that these cases will eventually wind up in the appellate courts. Which case will be the appellate “vehicle” and whether the buck will stop with state or federal courts on the issue is not clear. But I expect this will take years to sort out in the courts.
Legislative action clarifying the status of these workers would probably be appropriate, but the economic forces arrayed on both sides of the issue probably ensures legislative stalemate.
I’ve seen quotes by several commentators who are concerned that a loss by Uber will kill innovation. Some argue that workers today have different needs and expectations and that old legal structures fail to honor those needs.
Whether there is some new model for the employment relationship that will deliver adequate benefits to those doing the work is something we’ll likely see debated.
The ruling by Judge Chen in O’Connor v. Uber is here:
And the ruling in Berwick v. Uber is here:
UberV.BerwickLaborCommissioner
Stay tuned.
Julius Young
510.835.8870