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.
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.
+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.
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.
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.