Are Uber Drivers Employees? Strippers & Migrant Workers Provide the Answer

The Short Version:

  1. An employer's right to control the way a worker performs his or her job is the most important factor in determining whether an employment relationship exists. However, here, both Uber and its drivers have compelling argument regarding Uber's right to control or lack thereof.
  2. Secondary factors that courts use to distinguish employees from independent contractors—particularly those factors which seek to determine whether Uber drivers are engaged in their own business or are integrated parts of Uber's regular business—will play an important role in deciding this case's outcome.
  3. Combined with the amount of control Uber exerts over its drivers, the lessons learned from cases involving strippers and migrant workers lead me to find that Uber drivers will be considered employees of Uber, and not independent contractors.

Labor as we know it is evolving. In only the past five years, we have witnessed the rise of the gig economy and an explosion of online labor marketplaces in which workers are hustling to make a living off part-time gigs that do not provide them the securities of workers’ compensation, health care insurance, or even a minimum wage.

At the forefront of this labor revolution is Uber, whose drivers operate under a Licensing Agreement that disclaims the creation of an employment relationship and refers to them as “independent contractors.” It’s a neat trick that affords them the ability to undercut their competition by reducing their payroll costs and freeing them from liability for injuries caused by their more negligent drivers.

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Shifting Costs

Workers Are Misclassified as Independent Contractors
0%

Less Labor Costs Are Paid By Avoiding Payments for Workers Compensation, Social Security, and Other Payroll Taxes
  • 250
  • 200
  • 150
  • 100
  • 50
  • 0
  • Unemployment Taxes

  • Workers' Comp

  • Income Tax

Estimated Amount in Millions That States Lose Each Year from Employee Misclassification

However, just because you call a worker an independent contractor doesn’t necessarily mean they are one, and in Part One of this post, I explained that Uber is being sued by its drivers who allege that they are employees of Uber and not independent contractors. Uber claims that it cannot fathom how these drivers could be their employees since Uber is a software, not transportation, company, but the attorney for these drivers, Shannon Liss-Riordan, isn’t buying it. She says that Uber’s claim is just “the newest spin to avoid employee classification” as “new technology companies are using old-school methods to keep their workers from having rights under the law.”

If she’s right, then this lawsuit will strike at not just Uber’s bottom line, but its business model as a whole. Since the company’s debut in Mach of 2009, Uber has built a billion dollar business around acting as a middleman between customers and services providers and their success has inspired a number of other tech companies to follow in its footsteps. However, a finding that Uber drivers are employees of the company will have vast implications on every company that is trying to be the next Uber for ____.

So, in this post, I’ll return to the question that my first post left unanswered: are Uber drivers employees of Uber?

The Law Governing the Employee versus Independent Contractor Classification

Under California law, the primary factor a court considers to distinguish employees from independent contractors is the right to control. The general rule is that a person who hires an independent contractor to perform a job may only control or direct the result of that job, but not the means and methods of accomplishing that result.

Thus, for example, where a business hires an engineer to create, say, an iPhone app that allows persons to create “imojis” of themselves, that engineer is more likely to be considered an independent contractor if the business only directs the engineer as to how they want their imoji app to function and look; however, that same engineer is more likely to be considered an employee if the business instructs the engineer as to when he will work, what offices and computer he will work at, what platforms he will code with, and so on.

Unfortunately, examining whether Uber had the right to control its drivers will not be as simple as my example suggests, and the following questions will be helpful to assessing whether Uber exhibited an employer-like level of control over the way its drivers performed their work:

1. Does Uber supervise the drivers' work or instruct the drivers on where, when and how they should perform their work?

Employees are normally given specific instructions on how to perform their work and are expected to follow company procedure manuals.

Independent contractors are hired for a result and are free to produce that result using methods of their own choosing.

2. Does Uber have the right to fire its drivers without cause? Or do Uber drivers have the right to quit at any time?

An employer's right to fire a worker without notice is a significant indication that that the employer has the right to control the worker, thereby making it more likely the worker is an employee.

Independent contractors are engaged to do specific jobs and cannot be fired before the job is complete unless they violate the terms of the contract. Independent contractors are not free to quit and walk away until the job is complete.

3. Does Uber provides the tools & facilities necessary for Uber drivers to perform their work?

Employees work on an employer-designated site or route and use the employer's tools to accomplish their work.

Answering the above question reveals strong evidence of an employment relationship because Uber’s relationship with its drivers went beyond just directing the results of their work. Rather than solely acting as the middleman connecting riders with drivers, Uber instead sought to control how the drivers perform their work by imposing, in the drivers’ words, “a litany of detailed requirements” that dictated such things like how the drivers clean their car, what the drivers could say to customers,7 and even how timely their customer pick ups and drop offs must be. Moreover, the right to terminate has long been recognized as “[p]erhaps the strongest evidence” of a hiring party’s means to control a worker’s activity, and, here, the Licensing Agreement which Uber executed with its drivers explicitly accords Uber the right to grade the drivers’ performance and terminate those drivers who do not meet its requirements.

Yet, despite the foregoing, there are also comparatively strong indicators that Uber gave drivers a freedom atyipcal of that which exists in an employer-employee relationship. For starters, Uber did not control when the drivers worked as they were free to choose their own hours. Drivers were also free to choose where they worked as drivers could choose what geographic area they targeted for pickups.  Finally, Uber drivers were even given a degree of control over who they serviced as drivers were permitted to choose which customers they would pick up.

Being that both Uber and its drivers wield compelling arguments regarding Uber’s right to control, a number of “secondary factors” that California courts also use to determine employment status will prove important in this case. These factors seek to ascertain the nature of Uber’s working relationship with its drivers by asking the following questions:

1. Are Uber drivers engaged in a distinct occupation or business?

Employees works for one employer at a time and do not make their services available to the general public.

Independent contractors works for multiple parties at the same time. They are listed in business directories, maintain business telephones, and otherwise make their services available to the general public.

2. Do Uber drivers require a particularized skill to perform their work?

Unskilled or semi-skilled workers are more likely to be considered employees because courts have held that these are the type of workers that labors law are meant to protect.

3. How long are Uber drivers contracted to work?

Employees continue to work for the same person year after year.

Independent contractors are hired to do one job and there is no expectation of a continuous relationship.

4. Are Uber drivers paid by time or by job?

Employees are paid by the employer in regular amounts at stated intervals.

Independent contractors are paid per completed job.

5. Is the work Uber drivers perform an essential part of Uber's regular business?

Employees perform work that is a necessary part of their employer's regular business, such that the success and continuation of the business depends upon the employees' work.

Independent contractors perform a service on a one-time or occasional basis. Independent contractors' work does not form a regular and essential part of the business's main purpose, and a business's success and continuation is not dependent on the regular work of independent contractors.

It is important to note that the relevance of the answer to any one of these questions varies from case to case depending on the facts surrounding the parties’ working relationship. So, rather than sitting here and mechanically answering each question one by one for you, I will instead cut to the chase and say that this case will come down to counterbalancing Question 1 and Question 4, i.e. how much Uber drivers are engaged in their own distinct business versus how integrated they are in Uber’s regular business.8

And in looking to case precedent, I can tell you that, when combined with the amount of control Uber exerted over its drivers, the decisions in two particular cases—one recent and one seminal—tell me which way the law will lean.

What Do Strippers, Migrant Workers, and Uber Drivers All Have in Common?

The first of these decisions, Hart v. Rick’s Cabaret, is actually part of a series of recent rulings in cases where strippers have sued strip clubs claiming, like Uber drivers, that they were misclassified independent contractors whose employer was wrongfully taking from their tips. In what can only be considered a nationwide epidemic of the upmost importance, Rick’s Cabaret evidences that, one by one, courts confronted with these lawsuits have stuck it to the strip clubs by finding that strippers were employees for at least two reasons that help guide our analysis of whether Uber drivers are employees of Uber.

First, although a worker’s right to carry out work for multiple different parties is a strong indicator that the worker is an independent contractor engaged in his or her own business, these courts discounted the fact that strippers typically danced for multiple different clubs because, rather than reflecting economic independence, a dancer’s “freedom to work when she wants and for whomever she wants… merely mask[ed] the economic reality of dependence.” In other words, these courts recognized that having multiple jobs providing similar services for different parties (e.g., a person who is a waiter for 3 restaurants) could actually be a sign that the worker was economically dependent on this work instead of a signal that the worker was engaged in his or her own business.

Second, and crucial to the case at hand, when these courts were confronted with clubs’ claims that strippers should not be considered their employees because they were alcohol vendors or sports bars and not exotic dance clubs, the courts dismissed these claims as unrealistic, pointing to the fact that the stripper’s were so vital to their business that their survival depended on the stripper’s performance. Thus, these cases serve as an example that an employer may not avoid its legal responsibilities by merely slapping an independent contractor label on workers who regularly perform work that is necessary to a business’s primary function.

Indeed, the importance of a worker’s integration into the regular business of the employer has stood as a relevant factor for California courts since 1989, when the California Supreme Court decided, S.G. Borello & Sons, Inc. vs. Department of Industrial Relations. The seminal ruling guiding California courts tasked with distinguishing the employed from the self-employed, it was in Borello that the California Supreme Court first acknowledged that an isolated evaluation of an employer’s right to control was insufficient to capture the “infinite variety of service arrangements” for which the Labor Act was meant to protect.9 Thus, despite being presented with ample evidence demonstrating that every indicia of independent contractor status favored finding that migrant harvesters a crop grower contracted with were self-employed “sharefarmers,”10 the California Supreme Court still held that the harvesters were employees because the grower exercised “pervasive control over the operation as a whole” as “[a]ll meaningful aspects of this business relationship: price, crop cultivation, fertilization and insect prevention, payment, [and] right to deal with buyers … were controlled by [the grower].” In doing so, the court recognized that:

“a business entity may not avoid its statutory obligations by carving up its production process into minute steps, then asserting that it lacks ‘control’ over the exact means by which one such step is performed by the responsible workers.”11

And when I apply the above wisdom to the case at hand, it is my opinion that Uber drivers are unquestionably going to be declared employees of Uber. Uber is not merely the middleman that it proclaims to be, but instead it acts to control how the drivers perform their work. Although these drivers may drive for multiple ride sharing companies, this does not mean that they are engaged in their own business, but rather it is a sign that, like strippers who dance for multiple clubs, these drivers are economically dependent on this work to provide sustenance. Moreover, although the drivers may exercise a modicum of control over when they work, where they work, and who they service, Uber still exercises “pervasive control over the operation as a whole” because Uber alone decides the price these drivers charge and any decision that a driver makes regarding where they work and who they work for is still limited to the the realm of locations and customers to which Uber provides them access.

Thus, to answer the question that this section began with, what Uber drivers have in common with strippers and migrant workers is that Uber drivers form a regular and integral part of Uber’s business that is as essential to Uber’s success as strippers and harvesters are to the success of strip clubs and crop growers.

Conclusion

In one of the few public statements that Uber has made in response to the lawsuit, Uber’s spokesman Taylor Bennett said that “Uber will vigorously defend the rights…for drivers to build their own small business.” And as this case proceeds through San Francisco courtrooms, this is the narrative that will begin to become comical. Because at the same time Uber attempts to defy reality by claiming they are only a software company, they are also going to be arguing that their drivers are transportation companies. In fact, the Licensing Agreement that they execute with each driver does not refer to their drivers as “you,” “person,” or “driver,” but rather it refers to them (confusingly, I might add) as “Transportation Company.”

Yet, no matter how fervently Uber argues for its drivers’ right to be microentrepreneurs, the fact remains that Uber drivers lack many of the characteristics indicative of persons who are engaged in their own distinct business. People running their own business typically advertise their services to the general public, have control over the prices they charge customers, and are able to hire employees. Uber drivers, however, do none of the above. They do not advertise their services, they have no say in the prices that they charge riders, and they cannot hire other employees or assistants to help perform their work without first seeking Uber’s approval.12

And lest you really believe that Uber cares about defending anything other than their bottom line, then you should know that Uber CEO Travais Kalanick has already gone on the record to state that Uber will be one of the first in line to order self-driving cars. Because who needs microentrepreneur drivers when you’re a software company with cars that drive themselves, right?

But then again, that leaves me wondering: if we have self-driving cars, why do we need Uber?


  1. Relevant to the drivers’ allegations about their tips, Uber required drivers to decline cash-in-hand tips from riders twice before accepting it.

  2. If I did, however, analyze each one, I would tell you that Questions 2, 3 and 5 favor finding an employment relationship because Uber indefinitely hired these drivers to regularly perform unskilled labor that is integral to Uber’s business. I would also tell you that Questions 1 and 4 weigh against finding an employment relationship because Uber drivers performed work in which they were paid per job and in which they were free to work for other ride sharing companies.

  3. In acknowledging this, the California Supreme Court recognized that whereas the right to control test was developed during a time when the distinction served to protect an employer from liability for the actions of an employee, the new labor codes states have adopted were meant to protect the employees and seek “(1) to ensure that the cost of industrial injuries will be part of the cost of goods rather than a burden on society, (2) to guarantee prompt, limited compensation for an employee’s work injuries, regardless of fault, as an inevitable cost of production, (3) to spur increased industrial safety, and (4) in return, to insulate the employer from tort liability for his employees’ injuries.”

  4. The grower provided fairly elaborate evidence showing that these harvesters contracted for a finished job, applied skill and judgment, controlled their own work, and were compensated only for the results of their work.

  5. In response to the grower’s claim that he exerted no control over the way the harvesters performed their work, the California Supreme Court also noted “[i]t is the simplicity of the work, not the harvesters’ superior expertise, which makes detailed supervision and discipline unnecessary. Diligence and quality control are achieved by the payment system, essentially a variation of the piecework formula familiar to agricultural employment.”

  6. Not to mention that hiring other persons to drive Uber vehicles for you would simply create a pyramid scheme of decreasing marginal returns that no one would sign up.

  7. Relevant to the drivers’ allegations about their tips, Uber required drivers to decline cash-in-hand tips from riders twice before accepting it.

  8. If I did, however, analyze each one, I would tell you that Questions 2, 3 and 5 favor finding an employment relationship because Uber indefinitely hired these drivers to regularly perform unskilled labor that is integral to Uber’s business. I would also tell you that Questions 1 and 4 weigh against finding an employment relationship because Uber drivers performed work in which they were paid per job and in which they were free to work for other ride sharing companies.

  9. In acknowledging this, the California Supreme Court recognized that whereas the right to control test was developed during a time when the distinction served to protect an employer from liability for the actions of an employee, the new labor codes states have adopted were meant to protect the employees and seek “(1) to ensure that the cost of industrial injuries will be part of the cost of goods rather than a burden on society, (2) to guarantee prompt, limited compensation for an employee’s work injuries, regardless of fault, as an inevitable cost of production, (3) to spur increased industrial safety, and (4) in return, to insulate the employer from tort liability for his employees’ injuries.”

  10. The grower provided fairly elaborate evidence showing that these harvesters contracted for a finished job, applied skill and judgment, controlled their own work, and were compensated only for the results of their work.

  11. In response to the grower’s claim that he exerted no control over the way the harvesters performed their work, the California Supreme Court also noted “[i]t is the simplicity of the work, not the harvesters’ superior expertise, which makes detailed supervision and discipline unnecessary. Diligence and quality control are achieved by the payment system, essentially a variation of the piecework formula familiar to agricultural employment.”

  12. Not to mention that hiring other persons to drive Uber vehicles for you would simply create a pyramid scheme of decreasing marginal returns that no one would sign up.

AJ Afkari | techlawgic

A.J. Afkari is a Los Angeles attorney who specializes in legal matters related to the Internet, technology, and all things intertwined. He received his B.A. from UCLA, his J.D. from USC, and his A.J. from his mother.

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