Law and Politics

Independent Contractors and The New Economy

February 9, 2016
By Barry J. Peek and Chloe Serinsky

Barry J. Peek

In June, a court decision was issued with the potential to impact the nature of modern employment relationships. In O’Connor v. Uber Technologies, a district court judge in California, in denying a motion for summary judgement filed by Uber, ruled that Uber drivers were not independent contractors as a matter of law, and that the drivers – who were arguing that they were employees entitled to protection under California law – could present their case before a jury.

The significance of this decision is multifold. First, despite the fact that the drivers had signed a contract with Uber purporting to establish an independent contracting relationship, this played little role in the judge’s decision. Instead, applying California law, the judge considered whether the drivers provided a service to Uber, whether Uber had the right to control the drivers, and whether other factors indicated that Uber was in fact treating the drivers like employees.

Second, and maybe most important, the judge rejected Uber’s characterization of its business as a mere “technology company” designed to connect potential providers and consumers, rather than a transportation company. Uber, the court found, is no more a technology company than any other entity that relies on sophisticated technology to facilitate its business. Uber markets itself as a transportation service and generates revenue by retaining a pre-determined percentage of ride fare as a “service fee;” thus, its business is transportation, and its drivers provide a service integral to its business model.

Finally, the judge held that a reasonable jury could find that Uber reserved the right to control its drivers’ work, and thus, an employment relationship existed between the parties. Notably, the decision discussed how Uber could fire its drivers for any reason at any time, including when their customer ratings fell below a certain threshold. In fact, Uber issued handbooks to drivers containing exhaustive directions on how they should dress, pick-up customers, and even open doors. Although Uber framed these instructions as “mere suggestions,” the judge found that drivers’ performances were monitored extensively via customer feedback, and noncompliance often resulted in termination.

Uber is just one of many companies using an online platform to attract customers and conduct and manage its business. What this decision makes clear is that courts will closely scrutinize claims by companies that their workers are independent contractors, and that hi-tech companies are not immune from that type of judicial scrutiny.     

About the Authors:

Barry J. Peek is a Shareholder at Meyer, Suozzi, English & Klein, P.C and Co-Chair of the firm’s Labor Department. Chloe Serinsky is a law clerk at Meyer Suozzi and a third year law student at the CUNY School of Law

February 8, 2016

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