California Uber driver deemed to be an employee, not a contractor

A ruling in the case of a single Uber driver could have much broader implications for the popular ride-hailing service and for companies like it that rely on workers they see as independent contractors for on-demand services.

The California Labor Commission has ruled that an Uber driver should be considered a company employee, not an independent contractor.

The driver, Barbara Ann Berwick, filed a claim last year saying Uber owed her unpaid wages and other expenses. Uber has long contended that it is a technological platform used by independent drivers and their passengers to arrange and pay for rides.

The commission, however, found that Uber acted like an employer, and the driver, like a delivery person for a pizza parlor, was an employee. It awarded Berwick $4,152.20 in expenses and interest.

Landmark case

For Uber, a privately held company valued at $40 billion, the case is clearly not about the money involved but about what it could mean for its long-term business model and how it is regulated.

While Uber holds itself out as "nothing more than a neutral technological platform," it is in fact "involved in every aspect of the operation," the commission said in its June 3 ruling, which was filed on Tuesday.

San Francisco-based Uber stressed that the ruling is non-binding and only applies to one driver. It is also appealing the decision.

"(It) is contrary to a previous ruling by the same commission, which concluded in 2012 that the driver `performed services as an independent contractor, and not as a bona fide employee.' Five other states have also come to the same conclusion," Uber said in a statement.

The ruling is among legal challenges facing the company, along with Lyft, another ride-hailing service, from drivers seeking benefits and protections afforded to regular workers. But they are not the only regulatory hurdles the companies face. In New York City, the companies are battling efforts to regulate their apps, saying the efforts stall innovation and threaten competition

Currently, the companies treat drivers as independent contractors, which means they don't have to pay benefits. Classifying the workers as employees could raise the companies' expenses significantly - and would go against the heart of their business model and identity. Their selling points for attracting drivers are couched in ideas like freedom and autonomy.

"It's important to remember that the number one reason drivers choose to use Uber is because they have complete flexibility and control. The majority of them can and do choose to earn their living from multiple sources, including other ride sharing companies," Uber said.