On May 4, 2015, we introduced the highly-publicized dispute concerning drivers for the ride sharing company, Uber. Specifically, whether or not the drivers were considered employees of the company, rather than independent contractors.

On June 17, the California Labor Commission decided to weigh in on the issue. According to the Commission, Uber drivers are properly categorized as employees, not independent contractors.  Uber unconvincingly argued that it is a neutral technology platform which it suggested allowed for classification of its drivers as independent contractors and not employees. Uber specifically suggested that if its drivers were classified as employees, it, and other companies like it, would be vulnerable to increasing business costs, such as workers compensation benefits, which would negatively affect its valuation, and the valuation of similar services. The Commission rejected Uber’s argument and instead placed emphasis on the “control” mechanisms utilized by the company: Uber controls the tools the drivers use (including a special Uber smartphone), monitors drivers’ approval ratings, and terminates drivers if their ratings fall below 4.6 stars.  Ultimately, these factors supported the designation of the drivers as employees, not independent contractors. Only time will tell what that will mean for Uber, and other service-on-demand business.