Uber Appeal Focuses on Question: Are Drivers Contractors or Not?

Celia Ampel, Daily Business Review 

Uber has a tough road ahead as it appeals Florida's recent decision that a former driver was an employee, not an independent contractor, employment law experts said.

"They vigorously fight these cases and, in my opinion, are trying very hard to keep their business model in place," said employment lawyer Jamie Dokovna, a shareholder of Becker & Poliakoff in West Palm Beach. "Whether or not they get to continue with it may not be their choice."

Uber considers its drivers to be partners running independent businesses. But the state took a different position earlier this month, when the Department of Economic Opportunity notified a former Uber driver that he could seek unemployment benefits because he was an employee.

The key issue: Could the San Francisco-based ride-sharing company exercise enough control over its drivers to be considered their employer?

There's no cut-and-dried answer, said Mark Neuberger, an employment attorney for Foley & Lardner in Miami.

"For argument's sake, Uber does set controls on the manner and method of how they conduct business," he said. "They screen the people to determine who can drive and who can't."

But on the other hand, drivers are free to pick up passengers through the Uber app wherever and whenever they want.

"I go to work for Foley & Lardner, I've got to be here," Neuberger said. "That argues for employment status. If you set your own hours and you decide when you work, that pulls toward independent contractor."

A growing trend

Government agencies are getting tougher on companies who misclassify workers as independent contractors, Neuberger said.

It's cheaper for businesses to hire independent contractors, he said. Without employees, companies don't have to pay Social Security or unemployment taxes, nor do they provide worker's compensation or fringe benefits.

"All you do is issue a check and a 1099 at the end of the year," Neuberger said.

The employee-or-contractor issue is far from new, especially in the transportation, construction and technology industries, he said.

FedEx and its competitors have faced questions about whether their drivers are truly independent contractors, and in the late '90s, Microsoft paid $97 million to settle a class-action suit filed by workers who said they were misclassified.

"Anytime somebody gets fired and files some kind of complaint, it becomes a potential issue," Neuberger said.

Uber ended its relationship with Cutler Bay driver Darrin McGillis earlier this year after an argument involving damage to his car. McGillis filed for unemployment benefits, and the DEO sent him a letter classifying him as a former employee who could qualify for benefits.

"They were able to fire me," McGillis said. "An independent contractor can't quit his job. He has to finish his job. An employee can quit whenever he wants and can be fired."

Uber plans to appeal the decision, said a company spokesman who declined to comment further on the record.

The company has taken on similar filings around the country, and it is facing a class-action lawsuit in California filed by drivers who claim they were misclassified as independent contractors.

Weighing the factors

Uber is a unique company when it comes to classifying workers, Dokovna said.

"Is Uber really just a technology company like they say they are?" she asked. "[Their position is] 'all we do is have apps, and we link people up.' Or is it something more than that? Are they really a transportation company?"

If Uber is a transportation company that could not exist without its drivers, that would bolster a case that the drivers are employees, she said.

The Florida Department of Revenue uses a 10-part test to determine who is an independent contractor, weighing most heavily the amount of control the business can assert over the work.

Other factors include the skill required to do the job, whether a company provides instruments for the job—in Uber's case, a car—and whether the worker's services are essential to the company's success.

Because Uber drivers use their own cars and set their own schedules, Neuberger said he believes the law would tend to see them as independent contractors.

But Dokovna said she thinks Uber might have to change its business model to make a convincing argument that its drivers are contractors.

"They run background checks on the individuals before they are ultimately hired," she said. "They hand out a handbook to the drivers about certain guidelines. So when these people are doing rides, there is a certain level of control."

Of course, that control matters to Uber because it helps the company maintain service quality, said Angelo Filippi, a Fort Lauderdale attorney who leads the employment and labor law practice group at Kelley Kronenberg.

"While the company can dictate results, they cannot dictate the means to achieve the results or they are likely to be considered an employer," he wrote in an email. "Therein lies the quandary for any business seeking to establish independent contractor relationships."

Uber must appeal the Florida decision by June 9. If the state ultimately considers Uber drivers to be employees, the company might have to reconsider some key facets of its operation, Neuberger said.

"If they lose this, it goes to the heart of their business model," he said.

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