California Labor Commission Deals Uber a Bad Card

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The continuing debate about what constitutes employment in on-demand businesses took a symbolic but positive turn for Uber drivers today, when the California Labor Commission ruled a former driver is owed $4,152.20 for her uncompensated mileage and tolls incurred, plus interest on the total, while driving for Uber last year. The ruling is a one-off decision which does not apply to all drivers, but it could fuel the ambitions of drivers seeking to establish the basis for a class-action suit against the company.

The Labor Commission explicitly dismissed a claim for unpaid wages by the driver, Barbara Berwick, focusing only on the fees, such as bridge and road tolls, that she paid out of pocket while driving for Uber. She did receive payment for the 6,468 miles she drove at the IRS standard expense rate of $0.56 per mile, toll expenses and interest. The Labor Commission also decided that Uber is an employer similar to taxi service companies, though it has not applied that ruling to any other cases. That will certainly fuel more court action in the State of California.

Uber, reportedly in the midst of raising more money at a $50 Billion valuation, has not responded at length to the ruling, but did file an appeal, which will have to traverse the California courts before this case is settled. The driver, who is apparently is self-incorporated, was unable to produce records to show her earnings during the time she drove for Uber, which resulted in the denial of her claim that she was owed back-pay.

It is not clear that, had she been able to prove her Uber income, she would have received additional compensation. The fact that Uber provides drivers an iPhone — for which it charges a deposit fee — appears to be the primary reason for the Commission’s finding for the driver. But the ruling did detail how Uber’s logistics systems controls drivers’ options to the same degree as, according to the example cited, taxi companies do. Uber may need to discontinue its phone loan program, which could also prevent some drivers from performing work for the company.

Financial momentum is critical to Uber’s business, perhaps as important as its operational competence. It is key to raising more pre-IPO cash and the outcome of an initial offering. Investors may back off the premiums Uber revenues have commanded because of the ruling, which would be a blow to the company’s valuation. It will be years before the final decision about Uber’s relationship with drivers, whether it is an employer or not, is settled. In the meantime, this is a small but significant move in a long game.

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