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Uber Drivers Deemed Employees by California Labor Commission (techcrunch.com)
580 points by uptown on June 17, 2015 | hide | past | web | favorite | 593 comments

Skimming through the doc, court findings are:

1) Drivers providing their own cars is not a strong factor - pizza delivery employees also drive their own cars.

2) Uber "control the tools that drivers use" by regulating the newness of the car.

3) Uber exercises extensive control over vetting and hiring drivers and requires extensive personal information from drivers.

4) Uber alone sets prices, and tipping is discouraged, so there is no mechanism for driver (as "contractor") to set prices.

5) Plaintiff driver only provided her time and car. "Plaintiff's work did not entail any 'managerial' skills that could affect profit or loss."

6) Drivers cannot subcontract (presumably negating Uber's position as a "lead generation" tool for contractors).

Sorry that these are out of order. Look on Page 9 of court documents for full text.

Could this ruling be used to argue that the farmers in poultry raising contracts with Tyson, Poultry House, etc to raise chickens owned by Tyson are also employees?

1) Chicken farmers own and provide equipment that (2) the parent company requires and has set standards.

3) The contractee chooses farmers based on some criteria(not certain, but I would assume it's fairly extensive).

4) Contractee sets prices; the farmers do compete with each other for the best pay based on quality, but the farmers do not set prices. Chicken quality could be seen as equivalent to Uber's pay based on hours/distance driven.

5)Chicken farmers do possess skills that influence Tyson's profit or loss, so this point differs.

6)I'm very much doubt that the farmers can subcontract.

7) The chicken farmers are vital to the contractee's business; the profit of Tyson and other companies that use poultry contracts depends primarily on the supply and quality of the chickens raised by the contracted farmers.

Overall, Uber drivers and contracted chicken farmers seem fairly similar though the chicken farmers may conform slightly more to the traditional contractor role.

6) is critical, you can't just brush it off: someone who can hire other people to perform their labour is generally not an employee. What you're claiming applies to pretty much any fixed price contract, and it should be obvious that most such contracts don't result in an employee relationship. ALL of the necessary criteria must be met for that to happen - not just some.

e.g. I could be paid by a farmer to to work on such a chicken farm (presumably many people are), but I can't be paid by an Uber employee to cover their shift. That is a critical difference.

Then the farmer is just a manager exercising 'managerial skills' and his job cannot be sub-contracted, because Tyson only contracts with the manager/owner of the farm, not with someone that the manager/owner chooses to represent them before Tyson.

The farmers can subcontract, they can hire extra hands and don't have to do the work themselves.

In South Africa, that seems to be exactly the case, at least for most of the rides I've taken on Uber. The vehicle owners are not the same as the drivers (most of the Uber drivers here wouldn't be able to afford their own vehicles). Uber invoices are issued on behalf of third parties that employ the drivers and own the cars (drivers are still rated directly as individuals on the Uber app).

This seems an extension of the existing South African minibus taxi industry model, where drivers make a daily quota for taxi owners, then keep the rest. (It has also led to at least one early-afternoon Uber ride with a very sleepy driver who was up from before dawn making his quota for his owner).

In any case, in South Africa, at least, Uber is clearly acting as a facilitator, rather than a direct employer.

I think it would be a pity if rulings like the one in OP lead to the worldwide emergence of capital-rich fleet owners taking on the role of employers, because Uber became hesitant to deal with individual driver/owners for fear of being designated as their employer.

That's the case for most taxi drivers in general in Vietnam & China. One family member/friend gets the taxi license and lends the car out while he's sleeping/drinking.

It's a little rare to actually see the same person driving as is in the official picture in the cab. But then again, the cab is used 24/7 for maximum efficiency...

In the case of South Africa, taxi owners tend to own fleets of vehicles, rather than a single vehicle being shared.

I don't know if it is a distinction that matters, however, I was under the impression that Tyson et al., SELL the chicks at a set price to the farmer; then, offer to buy back all the chickens that are X days old after that, that meet their standards, whatever they are.

This is Tyson's overview of their contracts: http://www.growwithtyson.com/overview-of-contract-poultry-fa...

I hope so. The practices of those companies suck and are terrible for farmers.

Here's the segment John Oliver did on chicken farming: https://www.youtube.com/watch?v=X9wHzt6gBgI

As to 1, I cannot find anything on Independent contractors moving livestock? I went to Purdue, and all truck drivers look like employees? Maybe I missed something?


(Edit--I did find some vage(pretty much state regulations) at Tyson, but if anything they don't regulate their independent farmers enough?)

That's a very very interesting argument to be made.

Out of all those,

>Uber alone sets prices

is the killer one. I guess the only solution to that would be to make it more of a market where drivers could choose their rate to compete.

Exactly. Independent contractors set their own pricing. If Uber would allow the drivers to set their rates and then "hire" who they felt was best for them (and then markup the price to the customer for their own profit) only then would the drivers be in control of payment.

This is how every other independent contractor works.

It's a different situation though. I've never seen any employee ever working for two companies in the same "shift". I see lots of Uber drivers taking Lyft trips.

Riders set the rates with demand based pricing and drivers choose which one gives them the best opportunity at each trip request. That's a unique situation, so a comparison to "every other independent contractor" misses the point here.

It’s more common than you might think. A common example is jobs where 80% of the time they just need someone there, and then someone does piecework at the same time. EX: A night watchman who's also writting essays.

Also, Uber actively discourages this by penalizing drivers who skip to many fares, which suggests they really don't want you to do this.

At some point, Uber promised to pay a minimal hourly wage so if there were no passengers requesting rides, drivers would still make (a bit of) money. The resulting scam was to sign in as a driver, then just sit on your couch, skipping fares while still making a non-zero amount of money.

When Uber caught on, they added the penalty.

>A common example is jobs where 80% of the time they just need someone there, and then someone does piecework at the same time. EX: A night watchman who's also writting essays.

But in this case, when a driver takes a Lyft passenger instead of an Uber passenger, they are actively taking business from Uber. This is more like an employee working at a call center, and answering calls for another call center on their cell phone instead of taking the ones that are ringing at their desk.

Yeah but the night watchman isn't working for a competitor simultaneously.

You could be a night's watchman at an Amazon warehouse, and write stuff for Barnes and Noble, I don't think anybody would care.

I believe that's actually illegal even if common to work on a second job at your first job. Don't quote me, I'm not sure. Anyone know more?

Illegal or against company policy? There's a big difference.

Obviously it depends on the job.

Riders do not set the rates of "demand based pricing". There is a set floor price for a car ride with uber. If no one is riding the price is still set in stone. Increasing prices based upon arbitrary percentage utilization does not make it a 'free market'.

The idea would be for drivers to in some way set the price - not riders.

Rates are variable, and drivers choose when to drive. I've taken several rides where the driver only works during "surge" hours. What am I missing here?

Drivers didn't set the rate.

Ebay for instance, the suppliers set the prices. Amazon Marketplace: the seller sets the prices (not Amazon).

Uber sets the prices, NOT the free market.

You're misusing free market. If the gov had set Uber's prices, you'd be correct. This is just Uber's model (regardless of the whole employer/contractor debate). Another competitor is free to come up with a different model where driver's can set the rate.

https://en.wikipedia.org/wiki/Free_market > A free market is a market system in which the prices for goods and services are set freely by consent between vendors and consumers, in which the laws and forces of supply and demand are free from any intervention by a government, price-setting monopoly, or other authority.

Uber is a price setting monopoly, the "sole authority" of the price within the Uber "marketplace". Consumers do NOT have any ability to change the price. Nor do any of the Uber drivers.

Taxis never were a free market either. But at least they didn't pretend to be one like Uber does.

EDIT: I can't reply to ori_b below yet, but: he's completely right, I interpreted the parent comment as saying something it was not. I'm not sure "free market" vs. "monopolist" is the best way to name the alternatives here, but I agree that Uber does something more akin to setting wages/commissions than creating a "market" for its contractors. Original comment below for context.

> Uber is a price setting monopoly, the "sole authority" of the price within the Uber "marketplace".

Within the Uber marketplace dilutes the definition of "monopoly" into meaninglessness. Uber competes for drivers with Lyft, SideCar, taxi companies, limo companies, and, well, every other company hiring (relatively) unskilled labor. Uber competes for passengers with, uh, again, Lyft, SideCar, and taxi companies.

A free market does not require that consumers have the freedom to choose exactly what price they will pay for a particular product or service. What defines the free market is the ability to choose between competing products and services.

If you are trying to figure out if these are independent contractors or employees, this is the question that is relevant.

Can the Uber drivers, within the Uber marketplace, compete with each other? If yes, then they are acting like independent agents. If not, they are acting like employees.

So, is Uber acting like a market, or like an employer?

You're speaking as if Uber exists in a vacuum with no competitors. And consumers do have the ability to change the price, though not directly. They could go with a taxi, use Lyft, ride a bike, take a bus, buy a car, etc--all factors that influence the demand and thus price for such services.

Lets select "this spot" as the primary arguing point, okay?

Uber has one job. Connect riders with drivers.

The "libertarian" solution is to provide a marketplace where drivers can sell their services to riders. Drivers can compete against each other by raising or lowering prices, while riders can compete against each other by similarly increasing or decreasing the bid.

Uber pretends to do this, but with a distinct difference. Uber sets all the prices. Therefore, Uber is anything BUT a free market.

Maybe you don't get it because you haven't been paying attention to Uber marketing. But I'm not claiming that Uber has no competitors. What I'm saying is within Uber's "marketplace" of "independent contractors", the drivers and riders are in fact helpless to Uber's pricing whims.

Uber is NOT a free market. But they are trying to market themselves as one. This is a distinct reason why Uber drivers have been declared to be employees.

edit: remove snark

> The "libertarian" solution is to provide a marketplace where drivers can sell their services to riders.

States create solutions. The libertarian "solution" is to do nothing and let the interactions happen organically. This could mean a marketplace, it could mean other things. It really depends on what people want, the locality, technology available, etc. And sometimes people actually want a monopoly and are happy with that. Facebook is practically a monopoly and I don't think people want 2 main social networks.

> Uber pretends to do this, but with a distinct difference. Uber sets all the prices. Therefore, Uber is anything BUT a free market.

I agree that Uber by itself is definitely not a free market place. I'll take your word that their marketing paints a different picture--seems likely.

I think you've got my core idea down.


Lyft, et.al. 's are not part of the contractual relationship between Uber and the driver.

You are confusing anti-trust law ( or something else ) with labor law.

Dragontamer is speaking as if Uber's competition is external to Uber, which of course it is. Uber sets its price and then offers services in a free market at that price, just like any other company. That makes Uber different from platforms (such as ebay) that facilitate sales but do not set prices.

> demand based pricing

A misnomer. Uber sets the prices, not the market. Uber can market the concept as much as it wants, but it doesn't change the fact that Uber sets the prices and therefore, no free market really exists.

I think you're confused about what a free market is. Uber is competing against other ride sharing services, and Uber cannot set the price of those services.

Why the downvotes? While you may argue that most countries have only a semblance of a free market, Uber does indeed have competitors and is operating under market pressure.

Riders don't set the rates, no... but I'm not sure what that has to do with a free market.

They're not saying that Uber doesn't operate in a free market. They're saying that the competition between drivers within Uber for rides whose prices are fixed by Uber does not constitute a free market.

I suppose it makes sense when applied just to Uber, but it seems misleading. Actors in a free market system will have different models that in isolation would be not so free. I thought free market deals with aggregates.

Since Uber sets prices for a large portion of the market they operate in they have monopoly power and it's therefore not a free market. Uber's at 46% market share in major U.S. markets[0], since taxi's are regulated locally and Uber is setting prices for almost half the market nationally Uber is arguably the #1 regulatory power in the U.S. personal transportation sector.

[0] - http://www.forbes.com/sites/andrewbender/2015/04/10/ubers-as...

It's still early though, right? I mean, they might have some dominance now (I wouldn't call 46% in major markets a monopoly), but let's see how things shake out in a few years.

> Uber is arguably the #1 regulatory power in the U.S. personal transportation sector.

I would reserve the phrase "regulatory power" to government. I think you're using it here for the hyperbolic value.

Given Uber's recent $50bn valuation I'd say "the market" believes they'll keep their market power and resulting profits for some time into the future. (46% definitely means monopoly power but it doesn't mean monopoly.)

I am being snarky, but the libertarian poster-child is shielding 46% of the national market from competition (drivers can't compete with eachother) and that's pretty ironic.


> A free market is a market system in which the prices for goods and services are set freely by consent between vendors and consumers, in which the laws and forces of supply and demand are free from any intervention by a government, price-setting monopoly, or other authority.

Uber is a price-setting monopoly within the Uber market. Uber is the sole authority in the prices that consumers pay and that drivers receive.

The Uber marketplace is NOT a free market. QED. Its rent-seeking behavior on behalf of the owners.

I suppose if you consider Uber to exist in a vacuum with no other competitors or outside forces. But it doesn't, so I'm not sure how your usage of free market holds up.

Sure, but Uber previously styled themselves as just a middleman between drivers and passengers - the facilitators of a market, not a force in the market of their own.

Consider a counterexample - eBay is clearly a market. Independent buyers and sellers agree to transactions, on their own terms. eBay competes for the attention of both buyers and sellers, in terms of service and fees, not on the prices of the actual goods in the market.

If the competition that's happening in the transportation market is between Uber and Lyft, and that competition is on the price of rides and quality of rides, then Uber isn't a market, it's a vendor in a market - and thus the drivers aren't vendors within Uber's market, they're just employees of Uber.

Yeah, it's a new and interesting situation. And I'm sure Uber will appeal. But assuming this turns out to be final...

As an employer Uber can set shifts for its employees and ban them from taking jobs from anywhere else while on shift.

I wonder what Uber's new privileges with respect to its workers will cost. What benefits are California employers required to pay? Paid vacation? Pay in lieu of notice for termination without cause? Employment insurance contributions? Social security contributions?

It's all going to be a moot point in the end. Transport automation is coming.

Transport automation is indeed coming. This is even worse for Uber as their main asset right now is their network of drivers. When transport automation is mainstream (still pretty far away) these services will create a race to the bottom as the barrier to entry is very low. Bigger wallets than Uber can price them out.

Barrier to entry absolutely is not low with transport automation, and network effect will prevail. Rest assured Uber will happily ditch their drivers for computers at the first possible opportunity. They are investing heavily in this in fact.

Uber's biggest asset is the installed customer base. Uber's drivers are technically their biggest liability... as this ruling well demonstrates!

Uber has another big asset that I'm surprised hasn't been mentioned. Their ride data will probably be hugely valuable for routing automated vehicles. I'd wager they have people working right now to find the optimal distribution of self-driving cars over a given metro area/time of day.

I'll also speculate this this is a pretty big competitive advantage. Collecting that much ride data is not trivial.

That won't be static in the age automated vehicles. Vehicles will be networked and this dynamic will change constantly. Uber's ride data is useless at that point.

Collecting that much ride data is not trivial.

Actually it pretty much is, if you're willing to snoop on handshaking data from peoples' cell phones.

Why do you believe the network effect would prevail when self-driving transport is available?

When I want to get from point A to point B, it doesn't really matter what my friends or other people are using, I just personally want good service at a good price - and I don't think I'd be particularly loyal to any one provider.

I expect that smaller regional providers of self-driving taxis would be able to compete on even footing with larger companies, once self-driving vehicles are purchasable commodities without heavy R&D costs.

What most people want is a car to arrive very quickly (perhaps in seconds) of predictable quality for the best fee. The largest operators with the best software and economy of scale will win this game. You won't be able to automate a single car and compete, not the least of the reason being users aren't going to jump through 15 apps to request a car, and big players will not hand you their customers.

If Uber can operate 100,000 robo-cars in San Fran you can walk up to the sidewalk and press Hail and presto you have your ride. They can dynamically balance load between nearby cities on a day-by-day even hourly basis dispatching streams of robo-cars from their garages when the surges hit. Large events which drive demand are pre-scheduled and automatically reflected in both car distribution and the number of gasoline futures they trade on the options board for the upcoming week, etc. etc.

You can bet these robo-cars will be getting robo-tire-rotations and any other effeciencies they can squeeze out. (Imagine a line of them going through Uber's robo-washers)

5? 10? 15 years out? Doesn't really matter but I'm convinced it will eventually happen. It will be awesome and terrible all at once.

> Uber's biggest asset is the installed customer base.

Incidentally, this is why car manufacturers like Daimler and VW are running carsharing systems

Cheery o' good sir! An apt analysis if I've seen one yet.

No, Uber's biggest liability is their management not understanding the law, as this ruling demonstrates.

Laws aren't perfect. We would never have progress if we never challenged them (in reasonable contexts, not committing outright crimes). This is clearly a case where millions of people are benefiting from a modern approach and it makes sense to review the laws to see if they still work in the current era/culture/society.

Hardly. The only way you can possibly launch something like Uber is to adopt the "Act first, apologize later" model.

Companies like Uber face problems most of us can't even imagine, such as regulatory capture by the incumbent taxi industry. Yes, Uber plays dirty, but to some extent I think they have to, because it's a dirty game.

Disagree. Uber is investing heavily in self-driving cars. When they arrive in a practical way, Uber will have a brand name, an app already installed on millions of phones, and an infrastructure at scale to handle routing and billing. Not to mention excellent free cash flow and a valuation in the multi-billions that they can borrow against. Not sure who the bigger fish in this space is who would come along and eat their lunch?

"Yeah, it's a new and interesting situation."

No, it really isn't. There isn't anything special about them, unless you're one of those people that believes a patent should be granted for an existing process simply because now it says, "on a computer".

I have some experience in this area of law and in my view it's how the "on a computer" aspect of the situation affects the power dynamic between Uber and the driver that makes it new and interesting.

In the model where contractors are dispatched to handle some task by phone the contractor is able to make counter offers to the company. Eliminating that through automation affects the legal test. The point I was replying to about the ability to choose jobs from different clients (Uber vs Lyft vs all the other edelivery services) also makes this different.

This is a complex area of law, which I'm guessing you haven't personally litigated, so you incorrectly compare it to the software patent issue.

Some jobs are just "sit around unless something goes wrong, then handle the situation." Something going wrong being exceedingly rare.

I knew someone who worked at a grocery store that was 24/7. Except they did close on Christmas, New Years, and Thanksgiving. The store's insurance was for a 24/7 operation - which meant that someone had to be in the store even those 3 times a year it was closed. So my friend's job 3 times a year was just to sit in an empty store by himself. Just to comply with the insurance policy.

I knew someone who was a master control operator for a TV station for the overnight shift. He told me his job was "make sure the TV doesn't go off the air" which ended up being that he was on the internet and watching TV his whole shift since the TV broadcast very rarely malfunctions. (I don't know if this is usual or not for a master control operator)

I worked as an editor on overnight TV news broadcasts (for the early morning newscasts). Since most of the early news was a recast of the previous night I typically only had about an hour or two of work. That left 6-7 hours of watching tv, surfing the internet (this was in the late 90s so much less net and slower as well), reading, etc.

Another thing to keep in mind is that Uber drivers set their own hours. A real employee who just works when they feel like working wouldn't last long.

"It's a different situation though."

No, it isn't. There isn't anything special or unique about Uber that says they should be exempt from existing law.

"Riders set the rates with demand based pricing"

No, they really don't. I have no ability as a user to state how much I'm willing to pay for a trip.

Wouldn't that be a neat app option - put in your destination & fare (i.e. $11) and wait for a driver to agree to it.

Many taxi companies are actually dispatching outfits that license their branding. If you want to drive with their branding and receive their dispatch services and customers, you abide by their rules and pricing. You're an independent contractor, not an employee.

How is that different than Uber?

If that is the case Uber drivers will have to become licensed taxi drivers. Uber conveniently circumvented this on the argument that they are a sharing/collaborative economy startup, in turn saving themselves lots of money and gaining an unfair competitive edge. They can't use this argument as they have already cornered themselves in this regard.

Except California has previously ruled those people are employees too.


In Santa Cruz Transportation, Inc. v. Unemployment Insurance Appeals Board (1991) 235 CA 3d 1363; 1 Cal Rptr 2d 641, the Appeals Court held the drivers who paid the taxicab company a fixed-fee to lease a taxicab were common law employees of the company

Can they subcontract once they license the branding? If so, see point (6) of the thread starter comment. If not, I wonder if point (5) applies in that making licensing decisions is a "managerial" type thing to do. Seems hazy though, and it very well might be that it's no different than Uber, and those companies could be similarly ruled against. Lots of companies come up with schemes to treat employees as contractors, with varying degrees of success.

Uber's outcome on this case does not mean that there are no other companies that have not been discovered that are mis-categorizing employees, if anything, it's the opposite: Uber is mis-categorizing employees, so it's highly likely that other companies are too.

A taxi company that operates this way is at least close to the bar of having employees. You don't mention whether the drivers are allowed to subcontract work or not: if not, I'd be confident the drivers would be legally classified as employees.

This may simply not have been tested in court (or not in any newsworthy case). If you keep a small number of independent contractors happy enough, they won't split hairs over this issue.

I don't feel like setting prices is the hallmark of independent contracting. Mechanical Turk, for example, the price is (rightfully) set by the problem setter. Perhaps amazon would find it necessary to comply with your judgment by obscuring the price as a 'bid' and effectively require the turker to guess how much the problem setter is willing to pay, creating market inefficiency,reducing transparency, and potentially being more exploitative (amazon pockets the difference if the turker lowballs it)

I don't the situation is analogous. Amazon would be similar to Uber if they set the price for hit tasks. But they don't the hit submitters can set their prices and there is a vibrant market driving to certain price levels. If Uber let drivers set their own prices in some manner, then Uber would be operating a market. Instead they don't operate a market, they operate a direct to consumer service. I'm not certain if their drivers should be considered contractors or employees, but neither situation would be exposed directly to the consumer unless they switched to a market model.

Amazon doesn't set the prices though, the problem setter does. I think that's a meaningful distinction as there is not one rate for everything.

So is the Turk an employee of the problem setter?

Probably not.

As I said to you previously (https://news.ycombinator.com/item?id=9592532 ): What value do you expect to get out of demanding that people analyze these random situations? Ultimately, it's the government bureaucrats and legal system that make the decisions, so even if someone gives you some relatively definitive answer, it could still turn out to be wrong.

The determination is made by applying a series of subjective standards, looking at situations that are somewhat comparable along one of those standards is not necessarily going to inform the outcome if the other standards are subjectively more important.

There is room to articulate some frustration with the seeming arbitrariness of the law, but do that instead of asking argumentative questions that are only vaguely interesting to the topic.

I have no idea how Mechanical Turk works, however the end result in this situation would be the same. The independent contractor is allowed to choose the price by accepting tasks priced acceptably. the IC still "sets" the price they are willing to work for by only entering into agreements for work where they agree on the price being offered.

That's not a good analogy if you want to argue drivers are not ICs. The independent driver is allowed to quit driving if Uber sets the prices too low. The driver "sets" the price by only logging on when he agrees to the price that Uber has set.

> The independent driver is allowed to quit driving if Uber sets the prices too low.

But then the driver loses the ability to see when the price goes back up.

If you are "ON" the Uber app, you are required to accept the Uber price, or you get penalized. At no point can you say, "I am willing to accept this price which is lower than Uber." nor can you say "I am not willing to accept a fare below this price for this distance."

The ability to quit doesn't mean a thing. Everyone, regardless of whether they're an IC or an employee, technically has the ability to quit.

The point about price setting isn't that it must be the driver/turk. It's just that it can't be uber/amazon.

Indeed. After this, all the maids-as-a-service companies that use the same model will need to change or risk getting hit as well. [e.g. Homejoy]

Taxis also have set prices, though I think that Uber would want avoid that line of reasoning.

Taxi prices are set by administrative law, not company policy. That's why all taxis charge the same rates, regardless of the operating company.

If there's only one set price (and not limits), how does "luxurious" taxis make more than regular ones? Are they not operating as TAXIs?

Exactly -- they don't operate as taxis; they operate as "limo" or black car services. The rates are negotiated, often with direct input from the driver.

That depends on state law. For instance, in New York there are yellow taxis that you can hail but you can't call (on the phone) to be picked up; green taxis that you can call on the phone to be picked up in most of the city; and black cars that you can call on the phone for a pickup anywhere in the city, but which don't have to follow the same rates as the yellow and green taxis.

In Reno, you hardly ever see a taxi driving, so they can all be called for a pickup. I honestly don't know if one would stop if you hailed it.

Aside from real limos, I can't remember seeing luxurious taxis outside of New York. But if they exist, it would be because the local laws allow them to charge a different rate than regular taxis.

Minor correction: The green cabs ("boro taxis") can be either called or hailed, but in either case can only make pickups in the outer boroughs (and the very northern end of Manhattan).

Thank you.

In Sweden all taxis can charge what they want. [1]

[1] http://www.visitsweden.com/sweden/Travel-guide/Getting-aroun...

Not yellow cab taxis, no. Private car services are classified differently.

Aren't taxicab drivers also employees in California?

No, they rent the taxi, so they are customers of the taxi company.

Huh? Who signs their checks?

Independent contractors still get checks signed by the entity contracting them. This is not a useful or appropriate point regarding the contractor vs employee distinction.


But taxi drivers are usually W-2 employees, not independent contractors AFAIK.

In New York, taxis are generally rented out weekly. There's absolutely no employment relationship between a cab company and the drivers, whose only qualification is a livery license.

I have never ridden in a cab that didn't state the driver was an independent contractor.

Nope. Taxi drivers take home their fares. They aren't paid by the hour.

In some markets. In some others (like Sweden) they can set their own, just need to display the rate prominently.

How does this differ from the idea that if I want to get a fence built and I call up three fencing contractors and tell them "I am paying $1000 for a fence", I'm effectively setting prices.

It's not as it uber is the only employer - most drivers I've seen use lyft as well and choose between them at will.

I didn't read the ruling, and I'm not sure if any one of those points is a "killer" vs the others, but I have seen that autonomy is a big check to determine contractor vs employee (touched on by 2, 5, and 6). Loosely speaking, when using a contractor, you're really only supposed to specify the end result/requirements that you want, and then it's up to the contractor to figure out how to get there, be it a new room expansion, or a website. With the constraints of 2, 5, and 6, it seems the court feels that drivers don't have that much autonomy.

In that case, you're the direct customer.

As a rider, I cannot tell Uber I want to pay $20 to get me to the airport, I can accept their prices or not use the service. Uber is setting the prices for their drivers.

While that might appeal to some people (competition, etc), I think it would seriously weaken Uber from the perspective of marketing. Consistency of experience or pricing has been a huge driver for many businesses (Walmart, McDonalds, etc).

So would merely allowing tipping (which it absolutely should do either way) be sufficient?

How about Sidecar's approach of actually letting drivers price their services (to some degree)?

My thoughts as well. Maybe Uber and Lyft will migrate to this pricing model if it helps them get around these legal issues. Does anyone with legal knowledge know if this is a viable strategy?

Sidecar does this and it worsens the user experience for the most part. If this really is the key, I wonder how much lee-way Uber would need to offer to get over the hurdle. There are obviously ways it can offer pricing control but effectively get everyone at or near the desired price. Which I suspect would not fly.

The ever changing vechicle requirement has always has always baffled me? 2008 four door! Then 2000 when driver enrollment drops? The Uber fancy cars must be black on black? People were going into debt in order to make Uber money.

(I am so glad the government stepped in on this one.)

That would be really cool, a ride marketplace that lets you choose the driver based on rate (and or other factors). Does that exist already? If not, it should.

Yep, Sidecar has been doing this for a while.

We know how to run fast auctions, so this doesn't seem hard to solve. #5 Managerial Skills seems harder to work around.

I'm not sure why. I quit using Taxis as much as possible because of absolutely rude or terrible drivers. Thus they affected my business, and I went to Uber/Lyft. If I had a row of terrible Uber experiences I would quit using Uber.

That's already happening as Uber is reducing the compensation of drivers across the board.

Well, for me it started happening when Taxi drivers (the same rude people I was trying to avoid) started becoming Uber drivers as well. Sometimes I'll take an Uber and just be like, Oh, great, this guy is clearly a Taxi driver. I'll probably have to explain where to go, but at least he can't bitch and moan about me paying with a credit card.

I wonder about allowing drivers to bid on taking customers/routes?

Here's California's guidance to taxi companies on how to classify workers.

http://www.edd.ca.gov/pdf_pub_ctr/de231tc.pdf [PDF]

Cites precedent in Santa Cruz Transportation v. Unemployment Insurance Appeals Board. Here's what's relevant to Uber:

1) Drivers could be terminated if they did not maintain good relations with the public.

2) The company required the drivers to account for the fares they received.

3) The work did not require the expertise of a skilled professional.

4) The drivers depended on the company’s dispatcher for their livelihood.

5) The drivers did not set their own rates, but were paid according to the number and distance of fares they carried.

6) There was no evidence of entrepreneurial risk.

7) The customers called the company and the company arranged for the performance of the services.

8) The drivers did not advertise their services.

9) The driver’s work was part of the regular business of the taxicab company.

As an Uber Driver I find that there are a few big problems for us that simply come down to the fact that Uber as a corporation is a selfish and greedy and doesn't really care about the drivers:

1. We're not allowed to receive tips. 2. They take 20% of our commission anyways. 3. Who gets tipped here? Uber does, not me. 4. I use my own car, quite frequently, and unlike a pizza delivery guy, the valuable that I'm transporting is another person's life. 5. If I get into an accident, my insurance screws me. 6. I don't get paid enough.

> "If I get into an accident, my insurance screws me."

Well, unless you purchased specific insurance to cover the cost of driving your car for business use of transporting people.

Why is tipping the baseline expectation? I personally use Uber explicitly to avoid tipping.

Exatcly. And thats the case is many other countries.

Same here, and same for many of my friends that I've talked about this with.

Because Uber's wages are low.

Because it is the baseline for yellow cabs and black cars in the US

From my perspective, a valuable service that Uber provides me is to get rid of the hassle and annoyance of tipping.

Of course, for this to be done well they need to pay the drivers enough that tipping is not necessary.

7. If you get into an accident, you're screwing your passenger(s).

Yes, the valuable you're transporting is another person's life, and you're doing it in such a way that circumvent all regulatory safeguards to protect that.

Don't make Uber out to be selfish and greedy when you're doing the same.

Especially when, as the parent says, he's not using commercial insurance - which he knows he should be doing, by virtue of mentioning this.

if you loose money Ubering, don't do it, unless you do it for another reason

> Uber as a corporation is a selfish and greedy

And you aren't self-interested or greedy when you find the opportunity?

And why do you work for a company that is so terrible? Find a new occupation or work for a competing service.

I look forward to the day when the scientists bless humanity with a photosynthesis gene, so that our autotrophy-powered intellectual capacities can help the Free Market lead us to the next Pareto optimal unencumbered by animal impatience.

I can see some pretty clear holes in that reasoning. If you spend even a few minutes investigating whether you should actually drive with the Uber app, you realize there's an incredibly complex set of calculations to understand profitability, what kind of car to lease, how much to invest in passenger extras to boost your rating, associated "hidden" costs to factor in, etc.

Drivers absolutely choose their tools and invest heavily in those tools which directly impact their profitability and their ratings. Drivers absolutely employ managerial skill in deciding what hours and how many hours to work and what areas to drive in to get the best passengers and best ratings.

For example, the last Uber ride I took, the driver explained how they specifically avoid driving during certain time frames and certain locations because the fares are more likely to damage their tools, or leave poor ratings, or start yelling at them randomly.

> Uber exercises extensive control over vetting and hiring drivers...

For a pretty lose definition of 'extensive'. Nothing compared to a typical job interview and vetting process that a real hire goes through. How many dollars per contractor does Uber spend validating drivers? Probably averages to something like $25 - $50. There's a validation process, certainly, but it's hardly a "vetting" process.

> But for Defendant's intellectual property, Plaintiff would not have been able to perform the work

This is also absolutely not true. There are a number of different apps which would allow the plaintiff to perform substantially the same work using the same tools and the same business plan. But for using the Uber app, they would not be able to pickup Uber fares, obviously, but that's a tautology. They certainly would be able to perform the same work though. Or they could write their own app and perform the same work (obviously fighting the network effect, they may not succeed, but it's certainly possible).

The fact is that plaintiff can drop Uber on Monday and be driving for Lyft on Tuesday, or even drive for both concurrently and arbitrage between the two apps.

Personally I think this ruling goes too far, but it is a close call and it will be very interesting to watch this develop. The chicken farmer analogy is a good one. If Uber drivers are employees, it actually breaks a fairly large number of well established business models. I think this has more to do with push-back against Uber specifically than technical compliance with the law.

> The fact is that plaintiff can drop Uber on Monday and be driving for Lyft on Tuesday, or even drive for both concurrently and arbitrage between the two apps.

I keep seeing this, why do you believe that because people are using more than one app it makes it impossible for them to be employees? Why can't someone work more than one job and be considered an employee of both?

Not an expert, but intuitively it shows that Uber doesn't have any monopoly over their time at any level.

They can't be hourly, because in any given hour they may work for two different companies. They can't be salary, because they are collecting income from both companies concurrently.

So what are they? Minutely employees?

Even if you try to say that they are minutely employees, you have to account for the fact that there is no preset schedule, or even an expectation that the Uber driver must take a fare offered them. In other words, there's no "boss"; the computers are just making a series of offers, some of which may be accepted and others rejected.

Again, not an expert; just using my intuition.

Thanks, that does shed some light.

Since each effective work 'shift' begins with picking up a rider and ends once they're dropped off, outside of the taxi industry the best comparison i can make off the top of my head is the workers of one of those 900s numbers. They can work from home and accept calls as they please, with each payment being independent of the next. I'm not sure if they're contractors or not, never really looked into it, but they would be 'minutely employees', so to say. You don't even really need a 'boss' in that situation either, just a computer switching calls.

That's another great example, and I think that industry and thousands more just like it are all 1099 today and are impossible to run as W2. This is a really crucially important distinction which drives a significant percentage of GDP. That's why I think ultimately they are throwing the baby out with the bath water and it won't stand.

I don't think it is so easy for a driver to switch. Uber could easily penalize drivers that are not readily available.

Hmm, doesn't seem too far off from the trucking industry (when contractors are employed). I definitely know of at least one company that fits each of the bullet points above.

Uber's take: http://newsroom.uber.com/2015/06/clcstatement/

I think the "ruling" is pretty silly. The Uber model is reasonable. Maybe some tweaks are needed but from a high level it's a legitimate approach.

Sidecar has a different approach to #2,#4, and #5... wonder if that will work in their favor on this ruling #2: They just aren't as strict as Uber (can't remember specifics now but my friends 2003 Volvo qualified for Sidecar but not for Uber #4: Sidecar has a marketplace component where drivers bid for jobs #5: It is managerial to choose how to price a job

It's not a "court". It's a non-binding opinion from one state's pro-employee commission in one person's situation. It's very close to meaningless.


I mean, the roofer is likely a employee of a roofing company. You pay 1 check to the roofing company, and they do payroll for the roofers. Not many people hire 10 roofers 1 by 1.

Coder is a better question. I think the argument is that they have a lot more freedom in what they do... i.e. pick their own libraries etc.

Google "Vizcaino v. Microsoft". Whether or not a coder is a contractor or an employee depends very much on the level of control they have over how, when and where they do the work.

> I will say my only understanding of 1099 vs employee has always been "Does the worker have a set schedule" If the answer was yes, they are a employee- If no, a contractor.

Fast food workers, retail workers and such? They're hourly employees, but employees nonetheless.

But the schedule is forced by their employer. They don't start and stop working whenever they feel like it.

Or - many programmers and white collar jobs? I can work flexible hours, but I'm still an employee

Thanks for the breakdown. Sounds like a solid explanation. I wonder what other states/nations will do. This could affect the business model of Uber dramatically by increasing their costs and liabilities.

Fascinating! RentHop operates in an industry where almost everyone is an independent contractor on 1099: real estate agents.

1.) Agents are mandated to use their company logo and brokerage info in all ads, both by NYC law and by the company. Some companies have strict dress code requirements when meeting clients.

2.) The brokerage firm definitely controls the tools used, from internal databases to marketing syndication tools to in-house CRM systems.

3.) The brokerage firm has vicarious liability over the actions of their agents (also mandated by NYC law). For that reason the brokerage firm has a huge incentive to vet their employees.

4.) Agents generally have very little discretion if any on the commission charged. The brokerage firm sets commission policies and any deviations must be approved by the managing broker or associate broker.

5.) I highly disagree with the court ruling here [edit: administrative ruling?]; my understanding is Uber drivers are free to turn off the Uber app and operate without the source of leads generated, and that certainly impacts PNL (if that's not the case, agents still can't simply ignore leads forever without getting fired). Uber doesn't mandate when or where the work is done. Same with agents, the brokerages generally can't impact when or where the work is done, with the exception of some mandatory company wide meetings. Firms tend to provide desk space and equipment.

6.) An agent hired by a brokerage firm may not "subcontract" by having a friend show up in his place and conduct the work, even if the friend is a licensed real estate agent -- the brokerage, assuming vicarious liability for the actions of all their agents, would not allow it. This is different from an overworked agent asking a colleague to take over clients, both are still agents of the brokerage.

A mandate imposed on contract relations by law (even if echoed by company policy) is often different in considering the employee/contractor distinction than what not imposed by law.

Additionally, New York law is not California law, and 1099 vs W-2 distinction is a federal tax law distinction, which is distinct from California, New York, or even federal labor law employee/contractor distinctions (though some of the factors that are relevant may be similar between those different sources of law.)

> I highly disagree with the court ruling here

There is no court ruling, its an administrative ruling that is being appealed to a court.

Strange, it seems like that would be a clear case in favor of them being employees.

So the major factors that let many taxi companies maintain that drivers are contractors are subcontracting and tipping?

such arguments would also work in some EU countries where Uber is doing business or is about to.

Thanks, now it makes sense to me. Lot of these points ring true, specifically 3 and 4

A few thoughts:

1. This is an appeal from a decision by a hearing officer of the California Labor Commissioner. Most of the time such officers spend their days hearing things such as minimum wage claims. Hearings do not follow the strict rules of evidence and are literally recorded on the modern equivalent of what used to be a tape casette instead of by a court reporter. Such hearings might run a few hours or, in a more complex case, possibly a full day as the normative max. The quality of the hearing officers themselves is highly variable: some are very good, others are much, much less than good in terms of legal and analytical strengths. In a worst case, you get nothing more than a pro-employee hack. The very purpose of the forum is to help protect the rights of employees and the bias is heavily tilted in that direction. That does not mean it is not an honest forum. It is. But anything that comes from the Labor Commissioner's office has to be taken with a large grain of salt when considering its potential value as precedent. Hearing officers tend to see themselves as those who have a duty to be diligent in protecting rights of employees. Whether what they decide will ever hold up in court is another question altogether.

2. Normally the rules are tilted against employers procedurally as well. When an employer appeals a Labor Commissioner ruling and loses, the employer gets stuck paying the attorneys' fees of the prevailing claimant on the appeal. This discourages many employers from going to superior court with an appeal because the risk of paying attorneys' fees often is too much when all that is at stake is some minimum wage claim. With a company like Uber, though, the attorney fee risk is trivial and all that counts is the precedential value of any final decision. It will therefore be motivated to push it to the limit.

3. And that is where the forum matters a lot. The binding effect of the current Labor Commissioner ruling in the court is nil. The same is true of any evidentiary findings. The case is simply heard de novo - that is, as if the prior proceedings did not even occur. Of course, a court may consider what the hearing officer concluded in a factual sense and how the officer reasoned in a legal sense. But the court can equally disregard all this. This means that the value of the current ruling will only be as good as its innate strength or weakness. If the reasoning and factual findings are compelling, this may well influence a court. Otherwise, it will have no effect whatever or at most a negligible one.

4. What all this means is that this ruling has basically symbolic importance only, representing what state regulators might want as an idealized outcome. Its potential to shape or influence what might ultimately happen in court is, in my view, basically negligible.

5. This doesn't mean that Uber doesn't have a huge battle on its hands, both here and elsewhere. It just means that this ruling sheds little or no light on how it will fare in that battle. You can't predict the outcome of a criminal trial by asking the prosecutor what he thinks. In the same way, you can't predict the outcome here by asking what the Labor Commissioner thinks. In effect, you are getting one side of the case only.

6. The contractor/employee distinction is highly nebulous but turns in the end on whether the purported contractor is actually bearing true entrepreneurial risk in being, supposedly, "in business." There are a number of factors here that do seem to support the idea of true entrepreneurial risk but that just means there are two sides to the argument, not that Uber has the better case.

7. In the end, this will be decided in superior court and then, likely, on appeal to the California courts of appeal beyond that. It will take years to determine. In the meantime, the Uber juggernaut will continue to roll on. So the real question will be: should we as a society welcome disruptive changes that upset our old models or should we use the old regulations to stymie them? Courts are not immune from such considerations and, as I see it, they will apply the legal standards in a way that takes the public policy strongly into account. It will be fascinating to see which way it goes.

> In the meantime, the Uber juggernaut will continue to roll on. So the real question will be: should we as a society welcome disruptive changes that upset our old models or should we use the old regulations to stymie them?

That seems like a loaded way of phrasing the question.

You can say that again.

Here's another loaded way to ask the question: should we as a society welcome disruptive changes that allow companies to turn defacto employees into at-risk "entrepeneurs", or should we rely on over a century of established practices for protecting employees from being unfairly exploited?

> So the real question will be: should we as a society welcome disruptive changes that upset our old models or should we use the old regulations to stymie them?

Well that's a hilariously unbiased way of framing it.

It's like you're trying to say that something obviously good may have a downside. The important point is that Uber and its drivers are partners in a mutually beneficial relationship. If everybody starts contracting out services from each other, and we're all in business together, then nobody will be sitting on top of a pyramid supported by the state. How can that possibly go wrong?

Thanks for the clarification. This is a discussion worth having. As a consumer, I'm all in favor of Uber et al. But I'm worried about the implications of a society where "sell your services by the minute" becomes increasingly frequent.

I very much enjoyed reading this (longish) piece by Nick Hanauer and David Rolf, "Shared security, shared growth":


That was a great analysis, although I do have a small difference of opinion with you on point #7.

Uber's key innovation and disruptive influence is in the customer experience, and I look forward to them finding a way for them to focus on that without exploting technicalities in worker characterization.

Key for you, maybe. Key for their ability to make money is their "innovation" in avoiding regulation and reducing labor costs.

Agreed. However, their (in)ability to do one without the other is not my problem.

Uber started a revolution; but there is no requirement that they survive it.

+1. The media has gone wild with the "Uber drivers are employees" headline since it sells. The reality is that this is an individual case from basically an arbitration board. The most important point is that it affects public perception, which will potentially skew the jurors' thoughts in the actual lawsuits against Uber/others.

If I'm reading you correctly, the next step for Uber is to appeal this judgment in superior court. When is that likely to happen?

What do you make of the Berwick Enterprises wrinkle?

+1 for visibility. This comment needs to filter to the top.

Regarding 7, I fail to see how following the law would be "stymieing" them. If they have to break the law in order to be viable, then they're not viable.

So your position is that the purpose of the law is largely to protect incumbents? As with matters ranging from racial segregation to the 55 MPH national speed limit, the only way these types of laws ever change is by widespread civil disobedience.

A lot of counterexamples to that come to mind, such as airline deregulation, trucking deregulation, and telecommunications deregulation.

Civil disobedience should be the last thing you try, after all the usual channels fail, not something you just leap into because you don't feel like trying the proper channels first.

It depends on what you call "those types of laws." The ones you mention were imposed top-down, rather than actively encouraged by, say, the taxi companies.

I'm not sure about that. I'm less sure about trucking and airlines, but telecommunications regulations heavily protected the incumbent for a very long time, and my understanding is that AT&T played a big role in writing them.

That was a bit of a special case, though. The phone company was originally a lot more like the US Postal Service. They were given a guaranteed monopoly, in exchange for accepting the requirement to serve all customers no matter how costly or inconvenient. I don't see a lot in common between a taxi or taxi-like transportation service and a natural monopoly on rights-of-way and wires on poles.

If the AT&T monopoly had been preserved to the present day, and/or the Carterfone decision had gone the other way, I think we would be seeing a lot of civil disobedience in the form of people connecting unauthorized devices to the network.

AT&T accepting regulations in exchange for a guaranteed monopoly sounds a lot like taxi companies accepting regulations in exchange for sharply limited access to the market.

I'm sure we'd see civil disobedience of the form you mention if telecoms deregulation hadn't happened. But my point is that it did happen without the need for civil disobedience. Civil disobedience is reasonable and good when you've exhausted all the normal avenues for change and it's not working. But Uber hasn't even tried to get taxi regulations reformed or removed. They've started out by simply ignoring them without ever trying to work within the system.

The key point being, the telco regulation structure was at one time vitally necessary. The taxi regulations were, and are, not. They're just so much nanny-statist nest feathering, local government at its worst. They are a perfect example of something the free market could handle just fine on its own.

Of course we've definitely crossed over into matters of opinion now.

I don't understand how being unnecessary means that it makes sense to skip over trying to change regulations within the system and go straight for civil disobedience.

All I'm saying here is that if there are problematic regulations you should try to actually get them reformed or removed before you take the step of just outright violating them, because it can and does work sometimes to make that attempt. I'm surprised this is such a controversial opinion.

I'm curious to read this argument. For all the hand wringing over Uber drivers as 1099 workers, they seem to be the very definition of contractors. They provide their own equipment, keep their own hours, NEVER have to work if they don't want to and 0 consequences for working or not working specific hours, etc. What is it about them that makes the employee like? Anyone know?

Edit: it appears that the critical factor they considered was whether or not the driver could have operated their business independently of Uber. They said they could not. They also cited the fact that Uber controls the way payments are collected and other aspects of operations as critical to showing employment. http://www.scribd.com/doc/268946016/Uber-v-Berwick

I read the whole thing. There are a couple relevant sections but this one stands out to me as the best succinct summary of the argument:

"Plaintiff's car and her labor were her only assets. Plaintiff's work did not entail any 'managerial' skills that could affect profit or loss. Aside from her car, Plaintiff had no investment in the business. Defendants provided the iPhone application, which was essential to the work. But for Defendant's intellectual property, Plaintiff would not have been able to perform the work."

That's a pretty solid line of reasoning, to be honest. Note that for those unfamiliar with the subtleties of legal jargon, the words "but for" have a specific meaning that relates to causality. In other words that last sentence roughly translates to "if not for the existence of the iPhone app there would be no distinct or independent business here."

In addition, earlier in the ruling they address the fact that mere ownership of a car has historically not been considered the same thing as owning specific "tools" required to perform a job, and it cites the fact that previous precedent for delivery drivers that they are employees, and merely owning the car and paying for gas does not change that.

Can't the same driver provide rides using any other app besides Uber? Lyft, or some other guys that show up? He could have all the apps installed and hop between them, right?

They could. This driver didn't, if they had it might have been relevant to the decision perhaps. If anything that does seem like the one small hole you could poke in this situation on Uber's behalf.

Both Uber and Lyft actively discourage this activity though. Knowing how Uber's data mining team works, they have probably already built models to identify drivers who do this and send fares to them less frequently.

I feel like this could be another court case if they decide to continue calling their workers contractors.

Definitely. I think these networks should be forced to allow drivers to drive for anyone. Open it up and allow capitalism to drive down fees.

Yeah, too bad the taxi business is rife with semi-legal business tactics (or outright illegal ones like slashing a competitor's tires). Local cab companies have gotten away with it for years because the scale is small enough at the local level that no single company stands out, but Uber is perpetrating these schemes on a national level. I expect them to get smacked down at some point.

All that would do is mean the ruling would apply to those other companies as well, if it doesn't already.

I don't follow the argument that the driver can't affect profit and loss. Every driver can decide when and where to drive, and these two factors have a considerable impact on the income.

Yes and shift workers can take more shifts, or fewer shifts, in many situations. That doesn't make them entrepreneurs. There's a distinction between income and profit from a business, and simply deciding to work more or less often isn't an entrepreneurial activity.

But with Uber/Lyft, there's a lot more ingenuity involved in deciding when, where and how to work. It's not just a simple question of working longer hours.

I dont think that a factory making piecework pricing more complicated would change the legal employment situation though.

Factory workers typically have shift requirements. Uber drivers don't even have to work at all.

It's essentially the difference between hourly work and piece work. Making things into piece work and trying to get out of labor laws is an old trick that the authorities have thought of already.

Piece work is completely legitimate, you just have to make sure minimum wages are obtained.

A minimum wage arrangement, by definition, is an attribute of an employee/employer relationship.

Every driver can decide when and where to drive, and these two factors have a considerable impact on the income.

This is a factor in total revenue but not a factor in marginal profits.

As a Lyft driver it is a huge factor in marginal profits, especially with primetime/surge

But Lyft is controlling that pricing not the Driver.

Aren't the drivers rated? That would mean the drivers can, by driving badly or be rude, negatively affect their income. At the same time a really good driver might be able to make bit more.

Same thing with a waiter/waitress.

Where can I see the raitings of a waiter before I get seated? What restaurant will let me choose which waiter serves me?

I argue that because I don't get a choice of waiter, their actions have relative little consequence apart from the current transaction - I am not much more likely to come back because I may not get that same waiter - and customers have very limited information. Not so with Uber.

You can choose from a list of drivers with ratings on Uber?

I can't.

If they had to pay for the iPhone app, then they would have made an investment into the business. If a rival came along, then they could work without the need for Uber.

I don't think "but for" is legal jargon or has any special meaning in law, apart from the normal English meaning.

You're correct that it doesn't have some wildly divergent meaning from plain English, but it is in fact a legal phrase that has a lot of history and specific meaning behind it:




Are you a lawyer? Have you passed a Bar exam?

What's a butt for?

In my own opinion, the only reason Uber drivers are contractors is because it's cheaper for Uber, there is no other real reason behind this one. Their internal policies regarding drivers are acting like they are employees anyway, they don't even decide of their price. Otherwise where is the limit between employee and contractor ? Just every company you see could switch all their employees as contractors to reduce their costs.

They [...] keep their own hours, NEVER have to work if they don't want to and 0 consequences for working or not working specific hours.

Not true. I know someone who drives for Uber. Just last month, he was suspended because he did not want to drive during low-demand hours (when he literally loses money). Uber drivers are, in fact, required to (a) work when they don't want to and (b) work specific hours.

I've heard a lot of termination notices from Uber, but that doesn't sound right. Are you sure he wasn't turning down rides from outside of surge? Uber doesn't like it if you have a low acceptance rate. If anything, Uber wants you to work when there's surge to help drive prices down. Also sometimes Uber just makes shit up when the real reason for termination is something else. (Low rating, safety)

That would imply that there are consequences for not working when you don't want to. Implying that they're not contractors.

Why would that matter? I would totally "fire" (i.e. terminate the contract) a contractor that didn't work when I needed him/her to (i.e. that didn't get the job done). Why would Uber need to be any different?

The scenario you bring up is a 2-party scenario between a client (the passenger) and a service provider (the driver) while Uber claims to be in a 3-party scenario where they are a software-based logistics service in-between the passenger and the driver. Their entire legal argument is resting on the claim that they are merely facilitating the scheduling and the payment of the ride.

Incidentally, if it were a 2-party scenario where you required a specific contractor to be available on demand, you would probably be their legal employer. A mandated, regular schedule is indeed one the main tests when distinguishing between an employee and a contractor. I have worked as a software contractor in the US for over almost 15 years and the employers, especially the larger ones with proper HR departments, have been careful to define my work in terms of skills and deliverables, not hours worked.

A 3rd party logistics service can do the same thing. If my business is to connect customers with web developers, but one particular developer turns down nearly all the jobs I offer him, I'm going to stop wasting time sending him offers.

If I don't weed out people to make the connections as efficient as possible, I'm not doing very well at my job of handling the logistics.

You may want to get some clarity on this, this is not a policy Uber or Lyft have in place.

I've driven for Uber (and Lyft) and have NEVER heard of a policy like this or heard of such a thing happening.

I've had a quick read, the argument seems to be that because the driver is needed to fulfil Uber's rides that they become indistinct from Uber as a business itself; so they're employees.

They make some references to Case law for a Yellow taxi case back in 1991. (at least that was my reading!)

I would imagine that Uber would argue that it's businesses isn't providing rides, but connecting people who need rides to people offering rides.

But I think the Cali court may have had the right of it by going "that's bullshit."

Yes, and McDonalds has a business of connecting people who want hamburgers with people who are making hamburgers.

As one can quickly see that line of argument is exceedingly thin. In order for it to make even a little sense it would have to be rephrased to something more like an argument that Uber's business isn't providing rides, but connecting people who need a ride to an independent business that offers rides to people.

But McDonalds employees aren't also choosing to possibly flip a burger for BurgerKing in the same shift. One can quickly see your line of argument is exceedingly thing. The fact that alternatives exist and many drivers do operate for multiple services at the same time, shows that there is an independent business.

That argument has some merit to it, in the abstract, but this decision was regarding a Plaintiff who did not and had not ever driven for any other service, and that issue wasn't presented as a defense.

Which was entirely the plaintiff's choice, was it not? If I'm a contractor and I choose not to solicit jobs from a particular customer base, does that somehow mean that those other jobs didn't exist? If anything, the fact that some drivers do this and others do not shows some for of "managerial" skills that were cited as nonexistent.

Uber, represented in the hearing by high-priced attorneys, did not apparently bring up the idea that the Plaintiff could have (or should have) worked simultaneously for other car service apps. Presumably there were legal reasons why that argument wasn't compelling.

But taking a step back, though it does seem to be a vaguely mitigating factor, maybe, in the abstract, the fact is that this woman wasn't a contractor by the legal definition.

The law doesn't say that employee/employer relationships are determined by what could have happened in some alternate universe. There are full time employee plumbers and carpenters and programmers, and contractor plumbers and carpenters and programmers. They use multi-part tests and precedent to determine which is which.

The determination was that this woman was -- in fact - an employee, it was not a hearing to determine a hypothetical scenario.

Somewhere in California there may be an Uber driver with a fact pattern that makes them a contractor, or not, but it'll take more cases to figure that out.

Hm.. I do see the distinction there, but it seems to have interesting consequences for other industries that operate with a contractor model. If this woman could be deemed an employee by essentially contracting for only one customer base, couldn't contractors in other industries essentially become employees without ever being formally hired by restricting their customer base?

Of course this is assuming a similar situation with an organization that aggregates customers and connects them to contractors doing the work. The specific example that I saw elsewhere in the thread was the contracted chicken farmers[0]


> I do see the distinction there, but it seems to have interesting consequences for other industries that operate with a contractor model. If this woman could be deemed an employee by essentially contracting for only one customer base, couldn't contractors in other industries essentially become employees without ever being formally hired by restricting their customer base?

Yes. infact that happens quite a lot (subject to jurisdiction).

Many builders I know are very concerned about hiring the same contractor too often as they might accidently become an employee (and hence have to pay taxes on them).

No, it doesn't. Alternatives existing has no bearing on the argument.

McDonalds workers have required shifts, must wear uniforms, are provided with all the food they serve, etc, etc. Pretty poor analogy.

I build software applications for a living. I do not have required shifts. I do not have a uniform. I am not provided with all of the tools that I use to build said applications.

These things have nothing to do with my status as an employee or contractor as you'd never guess which one I was based on these facts.

Given your statement, your employer might be able to classify you as a contractor as long as you would stay on given the lessened benefits and self employment tax.

In software, the tools are a big determination, i.e., do you provide your own laptop? You might be a contractor. Are you given benefits such as reasonable vacation days? You might be an employee.

Mis-categorization of employees is a big issue for the IRS and few "contractors" are informed or in a position to threaten to challenge it.

In the software business, I've had an employer who gave me an employment contract and then just decided to write me checks like a contractor each month until I raised a fuss.

What happens when you don't do any work?

> Yes, and McDonalds has a business of connecting people who want hamburgers with people who are making hamburgers.

I don't know for McDonald's, but for many fast food companies that's absolutely true: the main company (the brand) only sells the franchises, and the franchisers actually own and operate the restaurants. However, the main company holds very tight control over the experience (prices, branding, inspections, menus, ...).

Indeed, the court's argument was "if Uber didn't exist, the drivers wouldn't be drivers", as in "drivers are NOT independent".

So, if Lyft and Uber and a hypothetical third all had similar business models, and a driver could find people to drive on more than one platform they would be considered independent contractors. I assume Uber wouldn't allow an Uber driver to also be a Lyft driver (citation needed).

This makes sense, and is similar to determining if ANY contractor is an employee. One determinator is if the "contractor" has multiple "clients". If a contractor only ever has one client, and is with that client for an extended time they are more likely to be found to be a full time employee instead.

Isn't the difference here that a contractor "could" have multiple clients. The fact that some might opt not to do that doesn't seem to have a significant impact on how they should be classified.

It's not the only factor but it is one. I guess it ultimately depends on the country / state / court.

Others factors generally include things like how you get paid (do you bill the client, or are you on payroll?) or the nature of your work (projects and deliverables, or day-to-day operations, etc).

Of course many of these things favour classifying Uber drivers as contractors, but there's enough of a gray zone for a court to rule they are full-time employees.

I have driven for Uber and Lyft simultaneously. Some even drive for sidecar. Of course, once you get a ride you have to turn off the other(s)

One wonders if some enterprising Craig Newmark type person will set up a service offering fewer guarantees but charging a small fixed fee on each transaction, much as Craigslist does with job postings.

Essentially: "No drivers, no Uber". Makes sense.

That's true for services like https://www.upwork.com, too, though. Upwork offers to match people with specific skills to people who need to hire them. Upwork helps track the work being done, and collects the clients' payments, passing them along to the workers minus a percentage.

I think providing a service to connect buyers and sellers should be able to be distinct from having employees.

> I think providing a service to connect buyers and sellers should be able to be distinct from having employees.

It is, but the court decided that Uber exercised too much control over the conditions of the work to just be connecting buyers and sellers.

It's a very fair point. I would add that since you seem to be able to be a driver for Uber/Lyft, etc. simultaneously, that would seem to suggest contractor as well.

Also, "no Uber, no driver" in this specific case at least.

No sellers, no eBay?

No, it's: "No Uber/Lyft, no drivers"

Sure, but I'm not sure what conclusion that helps us draw in regards to a contractor/employee distinction.

The former is saying a business cannot exist without employees performing critical functions (I'm not saying that this is de facto truth, but just phrasing the argument).

The latter is saying that without a business, you don't have employees/contractors, which makes sense, but seems obvious and inconsequential.

I think it's more like "You can't have one without the other, therefore they aren't just contractors".

A ride-sharer / driver needs the platform and the platform needs the driver, fundamentally. It's not like most contracting where it's not the end of the world if all the contracts end.


California Über Alles

What's the difference between a McDonald's franchisee and an Uber employee? This ruling would seem to indicate a franchise "owner" is nothing but an employee of McDonald.

A franchisee exercises management control that can affect profit and loss, can subcontract work performed,etc. The lack of these features are among the things cited as making uver drivers employees rather than contractors, so I don't get how you can say that this ruling would make McD franchisees employees.

A McDonald's franchisee has much more discretion in how they operate their business. They choose who to hire, how to manage them, where to run ads etc. They do have less freedom than someone running an independent restaurant, but it's very far from Uber's situation.

In addition to the other responses, McDonald's franchises require substantial investment on the part of the franchisee. You have to plop down hundreds of thousands of your own money, which represents entrepreneurial risk. This was found to be missing in Uber's case (according to the ruling) since there is precedent that bringing your own car doesn't qualify.

Additionally, McDonald's (or similar) locations are independently managed to a certain extent, that's why ads always say "at participating locations".

For one, the franchise contains multiple people so there is most definitely managerial work going on. I also imagine franchise owners possess some freedom in how they manage stocking and of various supplies, and might be free to choose suppliers.

You might be interested in how California is dealing with the franchise relationship as well[0] There are specific rules about that relationship that separates it from an employee.

[0] http://www.entrepreneur.com/article/240709

Is a Uber driver allowed to hire other drivers to do his job? A franchise owner can have multiple McDonald restaurants at the same time and hire workers. If no then they are not the same.

So hiring people to maintain the car is not the same?

Does Uber allows people to hire others to drive Uber cabs or not? that's the question here if you want to compare McDo with Uber. If I become a McDo franchisee, I don't have to flip sandwiches.

Seriously, read the above list of reasons, and the decision. Your question is already answered.

See the part about managerial tasks.

>They provide their own equipment...

The ruling points out that this isn't as important as it appears. The example given in the ruling is that of a pizza delivery person. A delivery person is considered an employee of a pizzeria even if they are required to provide their own car and pay for their own gas and insurance.

Also, Uber provides drivers with an iPhone (though they don't have to use it).

They don't provide the phone for free. They charge a weekly fee for use of the phone.


I think there's a very good argument for Uber having to treat the drivers as employees. They are dependent on Uber and Uber sets the amount they will earn. They would more likely be contractors if the drivers set their own rates and Uber would choose who they wanted to drive. Doesn't Uber also try to restrict who they can drive for too? Additionally, Uber's business relies entirely on the labor of the drivers. Uber also supervises the employees in-part by the rating system.

In terms of buying their own equipment - this is not an uncommon thing in many trades. Mechanics have to buy their own tools. Many machinists buy their own tools.

Truth is there is a lot of gray area here but I can see interpretation both ways. I do hope the drivers in California take this opportunity to organize as quickly as possible and begin collective bargaining with Uber.

I'd set Uber's value at less than one billion if this happened.

> I'd set Uber's value at less than one billion if this happened.

I think that would be a bit of an overreaction.

> I'm curious to read this argument. For all the hand wringing over Uber drivers as 1099 workers, they seem to be the very definition of contractors. They provide their own equipment, keep their own hours, NEVER have to work if they don't want to and 0 consequences for working or not working specific hours, etc. What is it about them that makes the employee like? Anyone know?

The ruling is embedded on the page.

The case law they cite: "In addition, even though there is an absence of control over the details, an employer-employee relationship will be found if the [Defendants] retain control over the operation as a whole, the worker's duties are an integral part of the operation, and the nature of the work makes detailed control unnecessary."

I think the GP was looking for a little color on the 21 page legal document. Without legal expertise, quite difficult to understand I would imagine. Which is what the GP inquired after.

Just wondering, are exotic dancers then also considered employees under California law?

I don't know about California, but increasingly exotic dancers are suing for employment rights. E.g. http://www.nytimes.com/2013/09/11/nyregion/strippers-are-pro...

In many first world countries, both exotic dancers and (where legal) prostitutes have employment rights.

Its frequently an issue of dispute, though some of the items cited for Uber drivers don't apply -- e.g., the Uber no-tipping rule -- so the cases are not precisely analogous.

Thanks it wasn't at first, gonna read it now.

The document is embedded in the article and answers all questions. I can't copy&paste, but the main argument seems to be an existing legal theory that says s/o is an employee if they perform an "integral part of the business" of their employer. There's a taxi corp precedent and pizza delivery is also mentioned.

I haven't read it but perhaps they ran afoul of the 'same manager, same job' over 6 months which tripped up Microsoft?

Control and Substitution are where the main issues are



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