Uber in the News: Employment Law Ramifications

April 22, 2016

In this era of independent contractors, workers have the ability to work for themselves as consultants for other companies. If they’d like, they can simply fulfill tasks that companies outsource. Companies such as the taxi firm Uber are a prime example of this. Unfortunately, companies like this are also an example of the number of employment law cases that have recently been involved in a class action lawsuit. The way in which these workers are treated compared to the huge profits these companies make off of independent contractors is causing the era of independent contracting to be called into question.

Uber, in its own words, states that it connects drivers with passengers. The company has independent drivers that work through its system. The company is adamant that it does not actually employ these drivers – it merely helps them to find customers. Whilst it is certain that the long-standing rules of trade no longer apply to this new world, the law finds itself having to play catch up. Uber has become such a powerful company that this new way of working has come to be referred to as the “Uber-economy”. It’s certainly true that the old rules don’t fit. However, the current cases being brought against Uber and Lyft will decide whether these companies really are 1. Helping workers by serving as a sort of go-between, or 2. Evading the legal processes that protect workers from exploitation by powerful companies in a new, innovative way.

In California, O’Connor v Uber Technologies has been allocated the status of a class action lawsuit, as there are so many disgruntled workers challenging the Uber way of working. In the case Cotter v Lyft Inc, drivers are suing because they want to be classified as employees instead of independent contractors (and to be properly compensated as such). The Uber and Lyft cases are going to be hugely influential in their impact on the future of employment law. Famous economists Alan Krueger and Seth Harris have studied this extensively, and they are adamant in their argument that a new, third class of worker needs to be properly created in law. Krueger and Harris state that traditional employment law is inapplicable to the new way of working. They say that unlike in a traditional employer-employee relationship, the independent worker is not provided with protection, minimum wage, the ability to bargain collectively, access to a trade union, and unemployment insurance (all the benefits enjoyed by employees). Essentially, an Uber driver has absolutely no employment protection.

Past case law provides guidance for the possible outcome of the cases. In 2010, $10 million was paid to delivery drivers who worked for a snack food company, Snyder’s of Hanover. They successfully argued that the company had wrongly classified them as independent contractors when they should have been classified as employees.

That said, the business structure of Uber and Lyft are rather different— and the court will take that into account. Another issue that the courts will consider (apart from the time allocation for drivers) is the fact that the absolute majority of drivers do not have commercial insurance for the private vehicles they use to ferry passengers. When accidents happen (and they inevitably do) insurance is unlikely to cover instances in which the driver is using a vehicle for profit. This is especially the case where a driver has not disclosed the use of his vehicle for work to his insurer. Yet Uber and Lyft both provide accident coverage for drivers, at an even higher rate than taxis. The protection of drivers and passengers is going to be absolutely essential for the courts to consider.

The bottom line is that companies (especially tech companies) like freelance contractors. With independent workers, they have lower overheads and less responsibility. Independent workers enjoy flexibility and freedom from a strict office environment. Yet these same workers may now be discovering that this flexibility means accepting the fact that people will take advantage of them. The views are differing; the courts will decide. In doing so, they may also decide the future of work as freelancing becomes a way of life for this generation.