Judge Denies Uber's Motion To Dismiss, Sets Up Jury Trial For 'Employees Or Independent Contractors?' Question

from the innovation-through-jurisprudence? dept

In a decision that’s sure to be applauded by Uber’s opponents, Judge Edward Chen has denied the ride-sharing company’s request to declare its drivers independent contractors. If Uber is forced to suddenly take thousands of employees on board, along with the added expenses and liabilities such a move would entail, it’s going to have a much harder time maintaining — much less expanding — a service that many people find preferable to the taxicab strangleholds present in many cities.

In denying the company’s motion for summary judgment, Chen calls Uber out for the “narrow framing” of its “we’re an app, not a company” assertions, but notes that Uber does grant its drivers enough leeway that the question cannot be completely resolved via a motion in his court. Chen also raises the spectre of further regulation — something that’s similarly unlikely to work out in Uber’s favor.

The application of the traditional test of employment – a test which evolved under an economic model very different from the new “sharing economy” – to Uber’s business model creates significant challenges. Arguably, many of the factors in that test appear outmoded in this context. Other factors, which might arguably be reflective of the current economic realities (such as the proportion of revenues generated and shared by the respective parties, their relative bargaining power, and the range of alternatives available to each), are not expressly encompassed by the Borello test. It may be that the legislature or appellate courts may eventually refine or revise that test in the context of the new economy. It is conceivable that the legislature would enact rules particular to the new so-called “sharing economy.”

And then sends the case on its way to a jury trial, something he notes earlier is the only way to resolve an issue this complex. No precedent is set or will be set, at least not in Chen’s court.

Until then, this Court is tasked with applying the traditional multifactor test of Borello and its progeny to the facts at hand. For the reasons stated above, apart from the preliminary finding that Uber drivers are presumptive employees, the Borello test does not yield an unambiguous result. The matter cannot on this record be decided as a matter of law. Uber’s motion for summary judgment is therefore denied.

This order disposes of Docket No. 211.

So, a case that has been running since August of 2013 may still be months away from a resolution. Uber’s inability to get the suit tossed doesn’t necessarily mean it’s destined to become Yet Another Cab Company. It still has options, but it also has an uphill battle against plenty of incumbents… and the politicians who prefer what they know to unfamiliar market entrants.

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Companies: lyft, uber

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Comments on “Judge Denies Uber's Motion To Dismiss, Sets Up Jury Trial For 'Employees Or Independent Contractors?' Question”

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17 Comments
Anonmylous says:

from http://www.dir.ca.gov/dlse/faq_independentcontractor.htm

“Even where there is an absence of control over work details, an employer-employee relationship will be found if (1) the principal retains pervasive control over the operation as a whole, (2) the worker’s duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary. (Yellow Cab Cooperative v. Workers Compensation Appeals Board (1991) 226 Cal.App.3d 1288)”

reading this makes it seem a lot less ambiguous.

1. Pervasive control. The only thing not under Uber’s control is the actual driving, all the other business aspects, payment processing, marketing, price control, and driver – passenger pairing is controlled by Uber.

2. This one is pretty plain as without drivers, Uber has no business.

3. Also pretty plain, Uber doesn’t need to maintain control over the routes taken by drivers and micro-manage them.

Under California law, Uber is likely to lose this case unless they modify their app to give drivers more control. Under Federal law… that’ll be decided in court too most likely.

orbitalinsertion (profile) says:

If Uber is forced to suddenly take thousands of employees on board, along with the added expenses and liabilities such a move would entail,

The expenses of becoming a “traditional company” and those up-front costs of finding ways out of those expenses like “traditional companies”. Then they can become a mega-corp and incur the expenses of buying politics to lower expenses and make law as they see fit.

Imagine all the employment opportunities and economic growth that entails!

Mason Wheeler (profile) says:

If Uber is forced to suddenly take thousands of employees on board, along with the added expenses and liabilities such a move would entail, it’s going to have a much harder time maintaining — much less expanding — a service that many people find preferable to the taxicab strangleholds present in many cities.

And that’s good. Remember, popularity <> quality.

Lots of people “prefer” to shop at Wal-Mart, but that doesn’t make them not a thoroughly evil, corrupt company that exploits and harms everyone they come into contact with. Uber is the same way.

Ninja (profile) says:

The idea that you can offer your car for rides whenever you have some time or need some money (given you fit into the company guidelines) is simply awesome. I’d gladly give rides at times nobody can find a cab for some extra cash.

Can’t have such freedom, can we? Can’t have that cash going into the hands of people outside of our little money club, eh?

Anonymous Coward says:

What about substitution? Is that a factor? Is an Uber driver able to substitute someone else for an assignment (eg ‘I’m busy, I choose my ultra-responsible 90 yr old neighbor to do this drive for me’)? If yes, he is independent and makes the decision himself how to fulfil the requirement. If no, he is not independent.

Kalila says:

Uber Drivers

To Anonymous Coward: No, Uber drivers can switch cars on the Uber X and XL platform but the drivers profile is stored on the APP, so we are employees. And btw it is convenient driving for Uber but this company is structured on GREED! A 25% cut out of my driver commission is TOO HIGH but this is what Uber takes from us.

John Fenderson (profile) says:

Re: Uber Drivers

“his company is structured on GREED!”

True, but the same can be said of the vast majority of companies that exist, so I’m not sure why that’s significant.

“A 25% cut out of my driver commission is TOO HIGH but this is what Uber takes from us.”

According to my non-Uber cab driving friend, Uber lets you take home more money than traditional cab companies. They structure the payment differently (the traditional cab company charges daily fees to drivers in addition to a percentage of the take) which makes direct comparisons difficult, but in the end cab companies keep more than 25%.

aerilus says:

Re: Re: Uber Drivers

seems like with regular cab companies they own the cars? service the cars? insure the cars? clean the cars? store the cars? equip the cars. the only fees that ride share apps are paying is credit card processing fees ad 2-4% background checks. staffing cost. I just dont see 25% maybe 10%

Anonymous Coward says:

I’m torn. On one hand, there’s a distressing trend for companies to misclassify workers as independent contractors to avoid paying their fair share of payroll taxes, providing health insurance and retirement benefits and avoiding collective bargaining. On the other hand, creating a software-driven environment that allows small entrepreneurs to join into an overall system that benefits consumers and drivers alike is a positive outcome. Hopefully the judge can hit it down the middle of the fairway and give these drivers the rights of employees while maintaining the current ecosystem and bringing greater competition to the market.

Khaim (profile) says:

Borello test

I was curious about the “Borello test” to which Judge Chen referred. From California’s Division of Labor Standards Enforcement:

There is no set definition of the term “independent contractor”[.] … For most matters […] this means applying 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 to be considered is whether the person to whom service is rendered (the employer or principal) 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 (emphasis added). Additional factors that may be considered depending on the issue involved are:

1. Whether the person performing services is engaged in an occupation or business distinct from that of the principal;
2. Whether or not the work is a part of the regular business of the principal or alleged employer;
3. Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
4. The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers;
5. Whether the service rendered requires a special skill;
6. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
7. The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;
8. The length of time for which the services are to be performed;
9. The degree of permanence of the working relationship;
10. The method of payment, whether by time or by the job; and
11. Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.
Even where there is an absence of control over work details, an employer-employee relationship will be found if (1) the principal retains pervasive control over the operation as a whole, (2) the worker’s duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary. (Yellow Cab Cooperative v. Workers Compensation Appeals Board (1991) 226 Cal.App.3d 1288)

IANAL, but most of these factors seem to fall in favor of Uber. The primary factor (in bold) supports the contractor angle, since Uber does not have much control over how or if a driver operates. The secondary factors are somewhat split: 1, 2, and 5 would suggest an employee relationship, but the remainder lean towards contractor. Factors 3, 4, 8, 9, and 10 are particularly slanted towards Uber’s position.

I think Uber has a reasonably good case here. I can also see why Judge Chen was unwilling to grant summary judgement.

(For those of you who are neither lawyers nor legal nerds, the bar for “summary judgement” is very high. You have to assume everything the other side says is true and still show that you’ll win. Most real cases won’t be decided this way. Summary judgement is mainly useful for things like “they accused me of something that isn’t illegal”, or “they aren’t even pretending to have any proof”.)

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