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Posted by on Jun 19, 2015 in Publications |

Uber drivers as employees – the law collides with the sharing economy

Uber drivers as employees – the law collides with the sharing economy

A decision by the California Labor Commission earlier this week (http://www.scribd.com/doc/268950895/268946016-Uber-v-Berwick) found that a San Francisco-based Uber driver was classified as an employee, not an independent contractor. The Commission relied on the criteria set out by the California Supreme Court in S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations (1989) 48 Cal.3d 341, ultimately finding that Uber “retained all necessary control over the operation as a whole” and was “involved in every aspect of the operation,” including but not limited to control over the type of vehicle that could use, restricting who could use its technology platform and restricting the driver to using Uber’s pricing structure. This degree of control by Uber over its drivers created an employment relationship and thus obligated Uber to compensate its driver accordingly.

Although the analysis conducted by the Labor Commission is not at all a new or surprising one in the field of employment law – and of course the ruling is far from precedent setting – it should still raise a huge yellow flag for a number of companies because it hints at future and significant collisions between the law and the sharing economy. For those who are unfamiliar with the term “sharing economy,” it is essentially an economic system built around one of the very first principles we learn as children – sharing our toys. Albeit, in this case the “toys” are everything from our cars to our houses, our pets to our lawnmowers. If you’re curious about this, a quick search for the term “sharing economy” should get you further up to speed.

Over the past years a number of providers have utilized the internet and mobile devices to help connect “sharers” with “sharees.” Some providers are familiar names such as Uber (ride sharing) and Airbnb (house sharing) while others may be less familiar, like Relay Rides (car sharing) or Dog Vacay (pet sharing). Many of these providers disrupt established industries by luring away customers with the promise of cheaper rates and easier access, while at the same time generally being able to evade a number of the legal restrictions – and the costs associated with those restrictions – that govern those mainstream industries, such as taxi cabs and hotels. However, if, as the Labor Commission did, the government begins to regulate these sharing services in the same way, this could considerably disrupt, or even destroy, the sharing economy by making it too cost-prohibitive to continue running these services. Whether this is a good thing or not remains to be seen, but regardless of how one comes down on the issue, it is clear that the sharing economy could be in for a bumpy ride in the future.

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