I'm curious to read this argument. For all the hand wringing over Uber drivers as 1099 workers, they seem to be the very definition of contractors. They provide their own equipment, keep their own hours, NEVER have to work if they don't want to and 0 consequences for working or not working specific hours, etc. What is it about them that makes the employee like? Anyone know?
Edit: it appears that the critical factor they considered was whether or not the driver could have operated their business independently of Uber. They said they could not. They also cited the fact that Uber controls the way payments are collected and other aspects of operations as critical to showing employment. http://www.scribd.com/doc/268946016/Uber-v-Berwick
I read the whole thing. There are a couple relevant sections but this one stands out to me as the best succinct summary of the argument:
"Plaintiff's car and her labor were her only assets. Plaintiff's work did not entail any 'managerial' skills that could affect profit or loss. Aside from her car, Plaintiff had no investment in the business. Defendants provided the iPhone application, which was essential to the work. But for Defendant's intellectual property, Plaintiff would not have been able to perform the work."
That's a pretty solid line of reasoning, to be honest. Note that for those unfamiliar with the subtleties of legal jargon, the words "but for" have a specific meaning that relates to causality. In other words that last sentence roughly translates to "if not for the existence of the iPhone app there would be no distinct or independent business here."
In addition, earlier in the ruling they address the fact that mere ownership of a car has historically not been considered the same thing as owning specific "tools" required to perform a job, and it cites the fact that previous precedent for delivery drivers that they are employees, and merely owning the car and paying for gas does not change that.
Can't the same driver provide rides using any other app besides Uber? Lyft, or some other guys that show up? He could have all the apps installed and hop between them, right?
They could. This driver didn't, if they had it might have been relevant to the decision perhaps. If anything that does seem like the one small hole you could poke in this situation on Uber's behalf.
Both Uber and Lyft actively discourage this activity though. Knowing how Uber's data mining team works, they have probably already built models to identify drivers who do this and send fares to them less frequently.
Yeah, too bad the taxi business is rife with semi-legal business tactics (or outright illegal ones like slashing a competitor's tires). Local cab companies have gotten away with it for years because the scale is small enough at the local level that no single company stands out, but Uber is perpetrating these schemes on a national level. I expect them to get smacked down at some point.
I don't follow the argument that the driver can't affect profit and loss. Every driver can decide when and where to drive, and these two factors have a considerable impact on the income.
Yes and shift workers can take more shifts, or fewer shifts, in many situations. That doesn't make them entrepreneurs. There's a distinction between income and profit from a business, and simply deciding to work more or less often isn't an entrepreneurial activity.
But with Uber/Lyft, there's a lot more ingenuity involved in deciding when, where and how to work. It's not just a simple question of working longer hours.
It's essentially the difference between hourly work and piece work. Making things into piece work and trying to get out of labor laws is an old trick that the authorities have thought of already.
Aren't the drivers rated? That would mean the drivers can, by driving badly or be rude, negatively affect their income. At the same time a really good driver might be able to make bit more.
Where can I see the raitings of a waiter before I get seated? What restaurant will let me choose which waiter serves me?
I argue that because I don't get a choice of waiter, their actions have relative little consequence apart from the current transaction - I am not much more likely to come back because I may not get that same waiter - and customers have very limited information. Not so with Uber.
If they had to pay for the iPhone app, then they would have made an investment into the business. If a rival came along, then they could work without the need for Uber.
You're correct that it doesn't have some wildly divergent meaning from plain English, but it is in fact a legal phrase that has a lot of history and specific meaning behind it:
In my own opinion, the only reason Uber drivers are contractors is because it's cheaper for Uber, there is no other real reason behind this one. Their internal policies regarding drivers are acting like they are employees anyway, they don't even decide of their price. Otherwise where is the limit between employee and contractor ? Just every company you see could switch all their employees as contractors to reduce their costs.
They [...] keep their own hours, NEVER have to work if they don't want to and 0 consequences for working or not working specific hours.
Not true. I know someone who drives for Uber. Just last month, he was suspended because he did not want to drive during low-demand hours (when he literally loses money). Uber drivers are, in fact, required to (a) work when they don't want to and (b) work specific hours.
I've heard a lot of termination notices from Uber, but that doesn't sound right. Are you sure he wasn't turning down rides from outside of surge? Uber doesn't like it if you have a low acceptance rate. If anything, Uber wants you to work when there's surge to help drive prices down. Also sometimes Uber just makes shit up when the real reason for termination is something else. (Low rating, safety)
Why would that matter? I would totally "fire" (i.e. terminate the contract) a contractor that didn't work when I needed him/her to (i.e. that didn't get the job done). Why would Uber need to be any different?
The scenario you bring up is a 2-party scenario between a client (the passenger) and a service provider (the driver) while Uber claims to be in a 3-party scenario where they are a software-based logistics service in-between the passenger and the driver. Their entire legal argument is resting on the claim that they are merely facilitating the scheduling and the payment of the ride.
Incidentally, if it were a 2-party scenario where you required a specific contractor to be available on demand, you would probably be their legal employer. A mandated, regular schedule is indeed one the main tests when distinguishing between an employee and a contractor. I have worked as a software contractor in the US for over almost 15 years and the employers, especially the larger ones with proper HR departments, have been careful to define my work in terms of skills and deliverables, not hours worked.
A 3rd party logistics service can do the same thing. If my business is to connect customers with web developers, but one particular developer turns down nearly all the jobs I offer him, I'm going to stop wasting time sending him offers.
If I don't weed out people to make the connections as efficient as possible, I'm not doing very well at my job of handling the logistics.
I've had a quick read, the argument seems to be that because the driver is needed to fulfil Uber's rides that they become indistinct from Uber as a business itself; so they're employees.
They make some references to Case law for a Yellow taxi case back in 1991. (at least that was my reading!)
Yes, and McDonalds has a business of connecting people who want hamburgers with people who are making hamburgers.
As one can quickly see that line of argument is exceedingly thin. In order for it to make even a little sense it would have to be rephrased to something more like an argument that Uber's business isn't providing rides, but connecting people who need a ride to an independent business that offers rides to people.
But McDonalds employees aren't also choosing to possibly flip a burger for BurgerKing in the same shift. One can quickly see your line of argument is exceedingly thing. The fact that alternatives exist and many drivers do operate for multiple services at the same time, shows that there is an independent business.
That argument has some merit to it, in the abstract, but this decision was regarding a Plaintiff who did not and had not ever driven for any other service, and that issue wasn't presented as a defense.
Which was entirely the plaintiff's choice, was it not? If I'm a contractor and I choose not to solicit jobs from a particular customer base, does that somehow mean that those other jobs didn't exist? If anything, the fact that some drivers do this and others do not shows some for of "managerial" skills that were cited as nonexistent.
Uber, represented in the hearing by high-priced attorneys, did not apparently bring up the idea that the Plaintiff could have (or should have) worked simultaneously for other car service apps. Presumably there were legal reasons why that argument wasn't compelling.
But taking a step back, though it does seem to be a vaguely mitigating factor, maybe, in the abstract, the fact is that this woman wasn't a contractor by the legal definition.
The law doesn't say that employee/employer relationships are determined by what could have happened in some alternate universe. There are full time employee plumbers and carpenters and programmers, and contractor plumbers and carpenters and programmers. They use multi-part tests and precedent to determine which is which.
The determination was that this woman was -- in fact - an employee, it was not a hearing to determine a hypothetical scenario.
Somewhere in California there may be an Uber driver with a fact pattern that makes them a contractor, or not, but it'll take more cases to figure that out.
Hm.. I do see the distinction there, but it seems to have interesting consequences for other industries that operate with a contractor model. If this woman could be deemed an employee by essentially contracting for only one customer base, couldn't contractors in other industries essentially become employees without ever being formally hired by restricting their customer base?
Of course this is assuming a similar situation with an organization that aggregates customers and connects them to contractors doing the work. The specific example that I saw elsewhere in the thread was the contracted chicken farmers[0]
> I do see the distinction there, but it seems to have interesting consequences for other industries that operate with a contractor model. If this woman could be deemed an employee by essentially contracting for only one customer base, couldn't contractors in other industries essentially become employees without ever being formally hired by restricting their customer base?
Yes. infact that happens quite a lot (subject to jurisdiction).
Many builders I know are very concerned about hiring the same contractor too often as they might accidently become an employee (and hence have to pay taxes on them).
I build software applications for a living. I do not have required shifts. I do not have a uniform. I am not provided with all of the tools that I use to build said applications.
These things have nothing to do with my status as an employee or contractor as you'd never guess which one I was based on these facts.
Given your statement, your employer might be able to classify you as a contractor as long as you would stay on given the lessened benefits and self employment tax.
In software, the tools are a big determination, i.e., do you provide your own laptop? You might be a contractor. Are you given benefits such as reasonable vacation days? You might be an employee.
Mis-categorization of employees is a big issue for the IRS and few "contractors" are informed or in a position to threaten to challenge it.
In the software business, I've had an employer who gave me an employment contract and then just decided to write me checks like a contractor each month until I raised a fuss.
> Yes, and McDonalds has a business of connecting people who want hamburgers with people who are making hamburgers.
I don't know for McDonald's, but for many fast food companies that's absolutely true: the main company (the brand) only sells the franchises, and the franchisers actually own and operate the restaurants. However, the main company holds very tight control over the experience (prices, branding, inspections, menus, ...).
Indeed, the court's argument was "if Uber didn't exist, the drivers wouldn't be drivers", as in "drivers are NOT independent".
So, if Lyft and Uber and a hypothetical third all had similar business models, and a driver could find people to drive on more than one platform they would be considered independent contractors. I assume Uber wouldn't allow an Uber driver to also be a Lyft driver (citation needed).
This makes sense, and is similar to determining if ANY contractor is an employee. One determinator is if the "contractor" has multiple "clients". If a contractor only ever has one client, and is with that client for an extended time they are more likely to be found to be a full time employee instead.
Isn't the difference here that a contractor "could" have multiple clients. The fact that some might opt not to do that doesn't seem to have a significant impact on how they should be classified.
It's not the only factor but it is one. I guess it ultimately depends on the country / state / court.
Others factors generally include things like how you get paid (do you bill the client, or are you on payroll?) or the nature of your work (projects and deliverables, or day-to-day operations, etc).
Of course many of these things favour classifying Uber drivers as contractors, but there's enough of a gray zone for a court to rule they are full-time employees.
One wonders if some enterprising Craig Newmark type person will set up a service offering fewer guarantees but charging a small fixed fee on each transaction, much as Craigslist does with job postings.
That's true for services like https://www.upwork.com, too, though. Upwork offers to match people with specific skills to people who need to hire them. Upwork helps track the work being done, and collects the clients' payments, passing them along to the workers minus a percentage.
I think providing a service to connect buyers and sellers should be able to be distinct from having employees.
It's a very fair point. I would add that since you seem to be able to be a driver for Uber/Lyft, etc. simultaneously, that would seem to suggest contractor as well.
Sure, but I'm not sure what conclusion that helps us draw in regards to a contractor/employee distinction.
The former is saying a business cannot exist without employees performing critical functions (I'm not saying that this is de facto truth, but just phrasing the argument).
The latter is saying that without a business, you don't have employees/contractors, which makes sense, but seems obvious and inconsequential.
I think it's more like "You can't have one without the other, therefore they aren't just contractors".
A ride-sharer / driver needs the platform and the platform needs the driver, fundamentally. It's not like most contracting where it's not the end of the world if all the contracts end.
What's the difference between a McDonald's franchisee and an Uber employee? This ruling would seem to indicate a franchise "owner" is nothing but an employee of McDonald.
A franchisee exercises management control that can affect profit and loss, can subcontract work performed,etc. The lack of these features are among the things cited as making uver drivers employees rather than contractors, so I don't get how you can say that this ruling would make McD franchisees employees.
A McDonald's franchisee has much more discretion in how they operate their business. They choose who to hire, how to manage them, where to run ads etc. They do have less freedom than someone running an independent restaurant, but it's very far from Uber's situation.
In addition to the other responses, McDonald's franchises require substantial investment on the part of the franchisee. You have to plop down hundreds of thousands of your own money, which represents entrepreneurial risk. This was found to be missing in Uber's case (according to the ruling) since there is precedent that bringing your own car doesn't qualify.
Additionally, McDonald's (or similar) locations are independently managed to a certain extent, that's why ads always say "at participating locations".
For one, the franchise contains multiple people so there is most definitely managerial work going on. I also imagine franchise owners possess some freedom in how they manage stocking and of various supplies, and might be free to choose suppliers.
You might be interested in how California is dealing with the franchise relationship as well[0] There are specific rules about that relationship that separates it from an employee.
Is a Uber driver allowed to hire other drivers to do his job? A franchise owner can have multiple McDonald restaurants at the same time and hire workers. If no then they are not the same.
Does Uber allows people to hire others to drive Uber cabs or not? that's the question here if you want to compare McDo with Uber. If I become a McDo franchisee, I don't have to flip sandwiches.
The ruling points out that this isn't as important as it appears. The example given in the ruling is that of a pizza delivery person. A delivery person is considered an employee of a pizzeria even if they are required to provide their own car and pay for their own gas and insurance.
Also, Uber provides drivers with an iPhone (though they don't have to use it).
I think there's a very good argument for Uber having to treat the drivers as employees. They are dependent on Uber and Uber sets the amount they will earn. They would more likely be contractors if the drivers set their own rates and Uber would choose who they wanted to drive. Doesn't Uber also try to restrict who they can drive for too? Additionally, Uber's business relies entirely on the labor of the drivers. Uber also supervises the employees in-part by the rating system.
In terms of buying their own equipment - this is not an uncommon thing in many trades. Mechanics have to buy their own tools. Many machinists buy their own tools.
Truth is there is a lot of gray area here but I can see interpretation both ways. I do hope the drivers in California take this opportunity to organize as quickly as possible and begin collective bargaining with Uber.
I'd set Uber's value at less than one billion if this happened.
> I'm curious to read this argument. For all the hand wringing over Uber drivers as 1099 workers, they seem to be the very definition of contractors. They provide their own equipment, keep their own hours, NEVER have to work if they don't want to and 0 consequences for working or not working specific hours, etc. What is it about them that makes the employee like? Anyone know?
The ruling is embedded on the page.
The case law they cite:
"In addition, even though there is an absence of control over the details, an employer-employee relationship will be found if the [Defendants] retain control over the operation as a whole, the worker's duties are an integral part of the operation, and the nature of the work makes detailed control unnecessary."
I think the GP was looking for a little color on the 21 page legal document. Without legal expertise, quite difficult to understand I would imagine. Which is what the GP inquired after.
Its frequently an issue of dispute, though some of the items cited for Uber drivers don't apply -- e.g., the Uber no-tipping rule -- so the cases are not precisely analogous.
The document is embedded in the article and answers all questions. I can't copy&paste, but the main argument seems to be an existing legal theory that says s/o is an employee if they perform an "integral part of the business" of their employer. There's a taxi corp precedent and pizza delivery is also mentioned.
Edit: it appears that the critical factor they considered was whether or not the driver could have operated their business independently of Uber. They said they could not. They also cited the fact that Uber controls the way payments are collected and other aspects of operations as critical to showing employment. http://www.scribd.com/doc/268946016/Uber-v-Berwick