The California Labor Commissioner's Office has ruled that a driver for Uber is an employee rather than an independent contractor.

The ruling requires the ride-on-demand company to pay the driver $4,152.20 in reimbursable expenses and interest.  Although that might not amount to much for Uber, which has recently been valued at more than $40 billion, the implications of the Labor Commissioner's ruling could reverberate throughout the "1099 Economy."

"The defendants hold themselves out as nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation," the Labor Commissioner said in the ruling.  "The reality, however, is that defendants are involved in every aspect of the operation."

The Labor Commissioner's ruling echoes a federal judge's order in a class action lawsuit against Uber in the Northern District of California.  In that order, U.S. District Judge Edward Chen denied Uber's motion for summary judgment, which argued that the Uber-driver plaintiffs are independent contractors as a matter of law.  As we discussed in this blog back in April, Judge Chen stated “Uber does not simply sell software; it sells rides."

The class action before Judge Chen is ongoing.  Moreover, the Labor Commissioner's ruling is only specific to the individual driver that filed that particular claim, and Uber is appealing the ruling.  At least for now, however, plaintiffs in the class action against Uber will likely point to the Labor Commissioner's decision as support for their positions.

And Uber is not the only company facing misclassification issues.  FedEx, which has already been on the losing side of these battles, announced last week that it will pay $228 million to resolve more than 2,000 employment misclassification claims by FedEx drivers in California.  The settlement is pending court approval in the Ninth Circuit.

These decisions and settlements continue to highlight the importance for employers to give careful consideration to the proper classification of their employees - and the significant penalties they can face if they fail to do so.



Photo Courtesy of Jason Tester,