A labor court judge in the state of Minas Gerais, Brazil has found that an Uber driver there is an employee of the company, taking the debate over the classification of drivers to another country. The Brazilian newspaper Zero Hora reports that the decision is the first in Brazil to recognize Uber as an employer of drivers. According to Reuters, the judge “ordered Uber to pay one driver around 30,000 reais ($10,000) in compensation for overtime, night shifts, holidays and expenses such as gasoline, water and candy for passengers.” Uber announced that it will appeal the decision. The ruling only applies to a single driver, but could open the door to more challenges.
Brazilian news portal G1 notes that the judge applied a multi-factor test for employment status under Brazilian law. Key factors included that a) users are assigned a driver by Uber, unable to select from options; b) Uber (not the passenger) pays drivers at the end of each week after withdrawing a percentage, thus going beyond simple mediation of passenger-driver business; c) transport is Uber’s primary business, as partially evidenced by its investment in automobiles vehicles; and d) Uber drivers are submissive to the company, forced to comply with strict rules in order to drive for the company.
Zero Hora also emphasized that the judge found that drivers were encouraged to drive regularly despite flexibility, and that Uber engaged in a hiring process by approving drivers.
Paul M. Secunda is Professor of Law and Director, Labor and Employment Law Program at Marquette Law School.
Although by no means a new question regarding retirement, the noteworthy growth of gig companies in the sharing economy has renewed concerns that even more American workers will lack access to employment-based retirement plans. Although some argue that the gig economy offers workers advantages including more independence and flexibility, company-sponsored retirement saving is not one of them. This is a dangerous state of affairs, as employment-based retirement plans make up a critical part of an individual’s strategy for retirement security.
Such retirement plans, like the nearly-ubiquitous 401(k) plans, provide a necessary bulwark against destitution in old age, especially given that Social Security provides only partial income replacement and few Americans have put away much in private savings. Yet, independent contractors, which is how most gig companies classify their workers, are approximately two-thirds less likely than standard employees to have access to an employer-provided retirement plan.
Much academic and judicial ink has already been spilt over whether Uber drivers and other members of the sharing economy are members of the so-called “contingent” workforce or “precariat” (part-time, leased, temporary, and per diem workers), not entitled to receive retirement benefits as part of their employment. Whether these employees are statutory employees is of utmost importance because it largely determines whether gig workers are covered by employment laws, as most such laws center on the employer-employment relationship.
What all these jobs have in common is that the work activity is happening outside of the traditional safety net of employment and are highly unstable. Whereas statutory employees are covered in the United States by numerous labor and employment law statues that provide security and protection in the workplace, workers in these alternative work arrangements are not. Once stable employment relationships have given way to relationships that are much more arms-length, regardless of whether it is a contractor situation, temporary employment, or a one-time encounter.
As Jon reported last night, an individual arbitrator has issued an award finding a California Uber driver to be an independent contractor rather than an employee. The award is wrongly decided. I won’t engage in a complete analysis here, but, to find employee status, the arbitrator relies primarily on four California cases, three of which involved FedEx drivers. The arbitrator concludes that the facts of the Uber case resemble previous cases in which workers were found to be independent contractors. She holds:
Uber drivers are not supervised; supply the cars they drive; do not wear Uber uniforms or signage; can drive simultaneously for any competitor, including Lyft, Uber’s biggest competitor; are paid for each ride and have the unfettered option to work as little or as much as they want and whenever they want in the geographical location assigned to their platform.
But to find independent contractor status on this basis, the arbitrator has to ignore some other highly relevant cases, including a 2006 California decision involving drivers who worked for a courier company, JKH Enterprises, Inc. v. Dep’t of Industrial Relations. In JKH, the court found that the drivers were employees despite the following:
[T]he drivers are free to decline to perform a particular delivery when contacted by the dispatcher, even if the driver has indicated his or her availability for the day . . . . All drivers  use their own vehicles . . . They pay for their own gas, car service and maintenance, and insurance . . . . The drivers’ cars do not bear any JKH marking or logo. And the drivers themselves do not wear uniforms or badges that evidence their affiliation or relationship with JKH. Some of the drivers perform delivery services for other companies as well . . . . The drivers receive no particular training. . . . All drivers set their own schedules and choose their own driving routes. Their work is not supervised. Indeed, JKH only has a vague idea of where its working drivers are during the business day. . . . The drivers take time off when they want to and they are not required to ask for permission in order to do so.
So, this particular Uber arbitration award is wrongly decided. Of much broader importance, however, the award brings home something critical about progressive federalism: namely, progressive states need to clarify that gig workers, like Uber drivers, are employees within the meaning of state employment law. Continue reading
The Recorder reports that Uber has “successfully persuaded a private arbitrator that a California driver for the transportation company is an independent contractor, not an employee, in the first arbitration in the United States to test that issue.” While drivers continue to challenge Uber’s mandatory arbitration agreements in court, the arbitrator’s decision represents the outcome of the first of what could become many individual challenges by drivers asserting proper classification as employees, if arbitration agreements are enforced.
During the last few years of the Obama Presidency, we saw a productive debate over the question of whether changes in the organization of work called for a new legal categorization of workers. In particular, the question was whether we need a third category, intermediate between “employee” and “independent contractor,” to capture the kinds of work arrangements typified by gig economy firms like Uber. Seth Harris and Alan Krueger, in a leading example, called for the creation of a legal category they named “independent worker,” which would grant some – but not all – protections of employment law to workers engaged in these types of work relationships.
There were several primary points of contention in the debate. One was whether such a third category actually was necessary, or whether the existing categories of employee and independent contractor were flexible and capacious enough to capture the new work relationships. Harris and Krueger took one position on this question, I took another.
A second question was whether a third category would result in ‘leveling up’ or ‘leveling down.’ One hypothesis was that if we created a new category – independent worker or something similar – workers previously classified as independent contractors would be shifted up (as it were) into the new category and thus granted expanded protections relative to what they enjoyed as contractors. The other hypothesis, the more pessimistic one, was that workers previously classified as employees would be shifted down into the new category and thus offered fewer protections relative to what they enjoyed as employees.
The Obama administration, with the Perez/Weil team in charge at the Department of Labor, presented a relatively favorable political context for trying out a third category of worker. Continue reading
A federal district judge has denied Uber’s motion for judgment on the pleadings in an important wage and hour case brought by UberBlack drivers (Razak v. Uber Technologies, Inc.). The order, from October, contains important rulings on what Uber drivers have to plead on the “employee” question to survive such a motion, and on what it takes for drivers to plead a minimum wage claim in Uber litigation.
With respect to employee status, the judge found that the drivers’ complaint contains allegations that make it “plausible” that they are employees, and not independent contractors, under the Fair Labor Standards Act. Here’s the key part of the order:
[W]ith respect to the degree of control exercised by Defendants (factor one), Plaintiffs allege, inter alia, that Defendants “control the number of fares each driver receives,” “have authority to suspend or terminate a driver’s access to the App,” “are not permitted to ask for gratuity,” and “are subject to suspension or termination if they receive an unfavorable customer rating[.]” (Compl. ¶ 91). As to whether the services Plaintiffs rendered require a special skill (factor four), Plaintiffs allege that, in order to serve as Drivers, “drivers must undergo PPA training, testing, examination, a criminal background check and driving history check.” (Id. ¶ 51). As to the importance of Plaintiffs’ services to the Defendants’ business (factor six), Plaintiffs aver that Defendants’ business is to “provide on-demand car services to the general public,” and that Plaintiffs are “drivers that perform on-demand transportation services for defendants.” (Id. ¶ 1, 24). Plaintiffs also specifically allege that they are “dependent upon the business to which they render service.” (See, e.g., id. ¶157 (“Plaintiffs and Class members are financially dependent on the fare provided to them by Defendants.”))
And, as the judge concludes, “[c]ourts in this district have found that plaintiffs had adequately pled the existence of an employer-employee relationship based on far less detailed complaints.” (The court also concludes that the drivers sufficiently alleged an employer-employee relationship under Pennsylvania state law, ruling that “Plaintiffs’ Complaint sufficiently alleges facts to demonstrate that Defendants exercised a high degree of control over the way Plaintiffs’ work was conducted.”) Given that the drivers here have essentially alleged the basics of the Uber business model, the order has broad implications for Uber drivers nationally.
Two, the judge finds that the drivers have adequately alleged that Uber violated their minimum wage rights. Continue reading