Uber Drivers Ruled "Employees" NOT "Contractors” May Put Start-up in Financial Trouble

In a plethora of cases filed against Uber, the company has now been given a new direction by the California Labor Commission.

In a case filed by Barbara Ann Berwick, a San Francisco based Uber driver, the question before the honorable court was the aspect of the relationship between the Uber drivers and the company.

The ruling by the California Labor Commission said that Uber drivers are not independent contracts, but they fall under the ambit of employer - employee relationship.

The honorable Court made the following observations, and these were backed by appropriate evidences. On the primary level, Uber provides smart phone based ride hailing service. For any person to recognize himself as an Uber driver, it is mandatory for him to register with Uber. Further, when a person starts working as an Uber driver, all the transactions the driver makes, the trips he accepts and rejects, and the amount for the trip, shall be solely controlled by Uber. This makes it very clear that, though the driver may look independent, Uber controls all the operations.

The Commission said Uber controls the tools driver use, monitors their approval ratings and terminates their access to the system of their ratings fall below 4.6 stars.

Thus, Uber is involved in every aspect of operation. Further, if Uber drivers are recognized as employees, Uber will have to incur more expenses, including Social Security, workers compensation, and unemployment insurance. That could affect its valuation, currently above $40 billion, and the valuation of the other companies that rely on large networks of individuals to provide rides, clean houses and other services.