Adding another wrinkle to the fight over whether Uber drivers are employees or independent contractors, a driver recently won unemployment benefits after the company kicked him off the ride-booking app.
Last month, California’s Employment Development Department awarded Patrick Ely of San Diego up to $9,308 in unemployment compensation. That means the EDD views Ely as an Uber employee, since independent contractors are not eligible for unemployment assistance.
The decision could create trouble for Uber as the company fights mounting pressure to give its drivers employee benefits such as overtime pay and reimbursement for driving expenses. While the award directly affects only Ely and doesn’t set a binding legal standard, Ely’s lawyer says it could have an impact on the larger question.
“It really makes it clear that these are employees, not independent contractors,” said Mark Burton Jr., a partner with Hersh & Hersh in San Francisco.
Uber is set to head to trial this summer in San Francisco federal court to fight a class-action lawsuit brought by California drivers who want to be classified as employees. A ruling against Uber could upset its entire business model, and could spell trouble for a long list of other on-demand startups that use independent contractors as drivers or couriers.
“We disagree with the decision,” San Francisco-based Uber wrote in a statement addressing Ely’s award, “but, since it only affects one person, and does not have any wider impact or set any formal or binding precedent, we continue to focus on the bigger picture: the O’Connor case.”
The O’Connor case is the class-action suit pending in San Francisco federal court.
But Burton said lawyers for the drivers in the class action might be able to present Ely’s unemployment award to the jury, and it could help sway the case in their favor.
“It may not be binding,” he said, “but it might be something that could add to the facts of the case.”
When processing Ely’s claim, the EDD sent him a nine-page questionnaire specifically targeted to Uber drivers. Ely answered nearly 100 detailed questions about his relationship with Uber, addressing whether he submitted to a background check and vehicle inspection, whether Uber required him to complete a training program, and whether he received feedback from Uber about his performance. The form even mentions the independent contractor controversy, asking whether Ely believes he is a contractor.
“There is no blanket ruling regarding Uber drivers,” an EDD representative wrote in a statement. “Each case is determined on its own merits.”
Ely’s award falls in line with a ruling last year by California’s labor commissioner’s office, which found that a different Uber driver was an employee and entitled to employee benefits. But a 2012 ruling by the same office found that another driver was an independent contractor. Labor departments in 13 states, including Arizona, Florida, New York and Virginia — as well as the EDD in California — have found individual drivers to be independent contractors, according to Uber.
These conflicting rulings illustrate the complexity of the employee vs. independent contractor issue. The matter is further complicated because a wide range of authorities are being asked to weigh in on the question. U.S. District Judge Edward Chen is presiding over the main class action in San Francisco federal court, but similar cases are being heard in many other state and federal courts, as well as before private arbitrators. There may be discrepancies among the decisions ultimately reached by the different bodies, or even between California’s own employment organizations. In an online post, the labor commissioner’s office acknowledged its office and the EDD could come to a different decision regarding the same worker.
“There is no set definition of the term ‘independent contractor’ for all purposes,” according to the post. “Thus, it is possible that the same individual will be considered an employee for purposes of one law and an independent contractor under another.”
For Ely’s part, he insists Uber has treated him like an employee. Ely, a 48-year-old private investor, drove for the company from June 2014 until he was deactivated last month over a previous traffic violation — the day after he filed an individual lawsuit seeking employee status, he says. By the end of his Uber work, after four fare cuts, Ely said he wasn’t bringing in enough money to make the job worthwhile.
“I wouldn’t even cover my gas,” Ely said, “much less the wear and tear on my car and being paid for my time. It just didn’t make sense.”
Marisa Kendall covers startups and venture capital. Contact her at 408-920-5009. Follow her at twitter.com/marisakendall.
