A new ruling in California has stated that Uber drivers are employees and not contractors, which raises the question of when does a contractor become an employee?
Uber is an app-based taxi service that connects customers with available drivers. Drivers sign up to the app and can choose the hours they work. They are expected to cover the expenses for their own cars, insurance, fuel, tolls and general costs of operating. Drivers are paid 80% of each fare.
One Uber driver in the USA, Barbara Ann Berwick, claimed business expenses against the company, even though this is not something that they agree to. California’s Labor Commission ruled that Uber is not just enabling the service between drivers and passengers, but is involved in every aspect of the operation. This includes holding the power of termination if driver ratings fall below 4.6 stars out of 5 and controls the app the drivers must use. Ms Berwick was awarded more than $4,000 (£2,544) in expenses.
So far this ruling only applies to Ms Berwick’s case, but it does raise questions about the rights and obligations of freelancers and those who connect them to work. Uber states they are an intermediary, connecting workers to work sources but that it doesn’t get involved in their business, as an employment agency may.
If this ruling becomes something more than a one-off decision it could impact on the entire sharing economy. There are other well-known sharing companies, such as Airbnb, that connect people with spare rooms to people on holiday needing a B&B. If the idea behind this ruling was to take hold in the USA and then in other territories including, perhaps, the UK then sharing companies may have to scale back their offerings and increase prices to cover “employee” overheads. This could affect flexible consumer access to the broad range of choices currently offered, and could mean more rules and regulations for the sharing company.
The UK has legislation about what rights and obligations apply to different industries, but there is a recent wave of business interest in ‘connecting people’ while seeking to avoid obligations relating to those industries. This Uber case arose in America, but a dispute in the UK could similarly escalate to bring the service sharing field into the spotlight and it may be that some business arrangements are found not to be as obligation free as hoped.
If you run a service sharing company and need legal advice regarding your obligations and rights contact our Business Solicitors at Slater and Gordon. Call us on freephone 0800 916 9052 or contact us online and we will call you.