Taxi Services Uber, Lyft Bound to Pay Drivers as Employees, Say US Judges

BY :KAREN GULLO

FEBRUARY 01, 2015

Uber Technologies' drivers may have to be treated as employees rather than independent contractors, a federal judge said, a day after another judge in San Francisco gave the same warning to Lyft.

The car service companies are fighting challenges to the business model they use throughout the United States that provides drivers with applications on mobile phones to pick up riders.

The drivers contend in their lawsuits that they're employees entitled to minimum wage, reimbursement for expenses and other benefits.

"The idea that Uber is simply a software platform, I don't find that a very persuasive argument," US District Judge Edward Chen said in court Friday.

Lawsuits against Uber, Lyft and other car-booking companies have mounted as they seek to crack open the US taxi and limousine market, estimated by IbisWorld Research to be an $11 billion industry.

Uber, founded in 2009, is the most highly valued US technology startup. The company raised $1.2 billion last month at a valuation of $40 billion.

Uber, led by chief executive Travis Kalanick, has roiled transportation markets worldwide by letting people hail rides from their smartphones.

That has disrupted established taxi and limousine companies, which have responded with protests in many places where Uber has introduced its service.

California law

Complaints brought by drivers are another obstacle for the on-demand car services.

The cases against Uber and Lyft in San Francisco, where the companies are based, were brought on behalf of drivers nationwide, although judges have narrowed them to include only California drivers.

They allege violations of California labor and gratuities laws and their lawyers have asked a federal appeals court to review rulings limiting the cases to only drivers in that state.

At a hearing in the Lyft case Thursday, US District Judge Vince Chhabria said that while categorizing employees using historical job descriptions and definitions is "woefully outdated," rulings from earlier cases lead him to conclude that drivers must be classified as employees.

Chhabria didn't say when he will issue a decision.

Chen said Friday there are several standards that govern whether Uber drivers are employees instead of contractors, including whether they're providing a service to the company and whether it controls their work.

Chen is considering Uber's request to dismiss the case before a trial.

Uber's control

He noted that Uber sets the rates by which drivers are paid, screens them. The company wouldn't make money without them and can terminate them, the judge said.

"I do think drivers are serving Uber," Chen said.

"If all you were doing is selling an app you could sell it at an app store, but Uber does a little more than that, doesn't it?"

Robert Hendricks, an attorney for Uber, said Uber is an intellectual property company, not a transportation business.

Drivers don't serve the company because Uber assumes no obligation to provide rides that come in through the app. Drivers are customers of the company, Hendricks argued.

"So the logo of being 'everyone's private driver' has no bearing?" Chen asked, referring to a company slogan.

Hendricks said that because Uber benefits from drivers using the app, that "makes them a customer."

"We make our money from licensing our software, when they use it successfully we can be compensated," Hendricks said.

"There is a difference between benefiting from a transaction and from a service," he added.

Chen ended Friday's hearing without issuing a ruling.

Bloomberg

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