Uber is well-known to city dwellers as a welcome alternative to the taxi cab – at the swipe of a smartphone, a driver magically appears to whisk riders away. While Uber may be a revolution in convenience, its labor practices are the subject of scrutiny and debate. Uber considers its drivers to be “associates,” not employees, and as such they are not entitled to benefits. This also makes the company exempt from certain labor laws and from paying social security, Medicare, and payroll taxes. However this may all change thanks to a recent California Labor Commission ruling, which declared that Uber must recognize a driver as an employee, not a contractor.
The case was brought before the California Labor Commission by Barbara Ann Berwick, a former Uber driver who argued that the company had failed to properly compensate her for her work. As contractors, Uber drivers are responsible for paying for insurance, fuel, maintenance, and also must commit to the large capital investment of owning a car. Uber maintains that it is merely a “logistics company” that facilitates a private transaction between two individuals. The Commission was not convinced:
“Defendants hold themselves out as nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation. The reality, however, is that defendants are involved in every aspect of the operation.” The Commission ordered that Berwick be compensated $4,152.20 for her labor at Uber.
The implications of this ruling could be profound for San Francisco-based Uber. The company’s model is based on the low cost of contractor labor. If some of these million plus contractors suddenly became employees, a wrench would be thrown into Uber’s engine. Recently valued at $50 billion, Uber so far has shown little concern for the ruling. “The California Labor Commission’s ruling is non-binding and applies to a single driver,” the company stated in response to the decision. “It’s important to remember that the number one reason drivers choose to use Uber is because they have complete flexibility and control.”
It’s also important to remember that Uber could be planning to replace all of its associates with self-driving vehicles as soon as possible.
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