Uber Drivers Misclassification Trial

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How do the courts determine Employee status?

A huge consideration in many employment matters is whether an employer-employee relationship truly exists. The law affords many legal protections for employees, which is does not for independent contractors. Additionally, employers have many financial responsibilities regarding employees, which it does not for independent contractors. Employers are required to pay certain taxes, such as Social Security, Medicare and unemployment taxes for its employees but not independent contractors. Employees are also covered by state and federal wage and hour laws, including minimum wage and overtime rules. They are also protected by workplace safety and anti-discrimination laws. They also may be eligible for worker’s compensation benefits for workplace injuries. See Exhibit A for the IRS 20-Factor Test used for differentiating the two for tax purposes. In addition, our text book also outlines criteria considered by the courts in deciding whether a worker is to be categorized as an employee or an independent contractor. Courts often consider the following questions.[8] (as outlined in our textbook, page 625):

- How much control does the employer exercise over the details of the work? This is most likely going to be the most important factor used by the courts in making this decision.

- Is the worker engaged in an occupation or business distinct from that of the employer?

- Is the work usually done under the employers direction or by a specialist without supervision? If done under employers direction, it leans more towards employee status.

- Does the employer supply the tools at the place of work?

- For how long is the person employed?

- What is the method of payment- by time period or at the completion of the job?

- What degree of skill is required of the worker? If a lot of skill is required for a specialized job, it would indicate more of an independent contractor relationship.

Different laws and regulations use different factors or place different weight on factors, which means that sometimes an individual may be classified as an employee for one purpose yet remain an independent contractor for another. Consequently, it is necessary to examine each service relationship and then apply the law to those facts. Additionally, each state has their own set of laws governing this issue which confuses the matter even more. Most state laws and regulations in California apply the "multi-factor" or the "economic realities" test adopted by the California Supreme Court in the case of S. G. Borello & Sons, Inc. v Dept. of Industrial Relations (1989) 48 Cal.3d 341. In applying the economic realities test, the most significant factor is whether the employer has control or the right to control the worker both as to the work done and the manner and means in which it is performed. The issue in Borello involved whether share farmers were employees or independent contractors for workers compensation purposes. In addition to reviewing the common law independent contractor factors involving level of control, Borello looked at the economic dependence of the worker upon its principal and the extent to which the worker is integral to the business to determine that the farmers were in fact employees. [1] In the case of Uber Technologies, a similar question arises on whether Uber drivers should be classified as employees rather than their current status of independent contractors.

Just recently, in light of an increase in the misclassification of employees as independent contractors across the country, the US Department of Labor (DOL) has issued new guidance on classifying workers under the Fair Labor Standards Act (FSLA). Misclassification denies workers of statutory protections and results in lower tax revenues for government and presents a disadvantage to those employers who correctly classify their workers. In a statement made by David Weil, the administrator of the Dept of Labor’s Wage and Hour Division, he claims “Although independent contracting relationships can be advantageous for workers and businesses, some employees may be intentionally misclassified as a means to cut costs and avoid compliance with labor laws.” [2] The new guidelines issued by the DOL include six factors or questions; Is the worker an integral part of the Employers Business? Does the Worker’s Managerial Skill Affect the Worker’s Opportunity for Profit or Loss? How Does the Worker’s Relative Investment Compare to the Employer’s Investment? Does the Work Performed Require Special Skill and Initiative? Is the Relationship between the Worker and the Employer Permanent or Indefinite? What is the Nature and Degree of the Employer’s Control?

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The Argument for the Plaintiffs, Uber Drivers:

Statement of Facts of Class Action Complaint and Jury Demand: Douglas O’Connor, et al, vs Uber Technologies, Inc., et al. Case No. CV 13-3826-EMC [3]

Uber provides car service in cities throughout the country via an on demand dispatch system. Uber offers customers the ability to hail a car service driver on a mobile phone application. Uber’s website has advertised that “Uber is your on-demand private driver.”

Uber has stated to customers, on its website, and in marketing materials, that a gratuity is included in the total cost of the car service and that there is no need to tip the driver.

However, Uber drivers have not received the total proceeds of this gratuity. Instead, Uber has retained a portion of the gratuity for itself. For Uber Black, Uber SUV, and UberX drivers, Uber has not specified the amount of the gratuity.

However, it is customary in the car service industry for customers to leave approximately a 20% gratuity for drivers. Thus, where the amount of the gratuity is not specified, reasonable customers would assume that the gratuity is in the range of 20% of the total fare.

As a result of Uber’s conduct and actions in informing customers that gratuity is included in the cost of its service, and that there is no need to tip the drivers, but then not remitting the total proceeds of the gratuity to the drivers, Uber drivers have been deprived of payments to which they are entitled, and to which reasonable customers would have expected them to receive.

Although classified as independent contractors, Uber drivers are employees. They are required to follow a litany of detailed requirements imposed on them by Uber and

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