As many other employers confront similar legal controversies in terms of employee misclassification issues, this as well as other cases suggest that new classification tests may be needed to keep up with the pace of technology.

As we have previously discussed, Uber is no stranger to legal controversy. The ride-sharing company records approximately one million ride requests each week, and is now valued at an estimated $18.2 billion.  Despite such apparent commercial success, it struggles to overcome regulatory hurdles and employment lawsuits.

Berwick v. Uber

In Berwick v. Uber Technologies Inc., the California Labor Commission recently ruled that Uber improperly classified one of its drivers as an independent contractor. Plaintiff Barbara Berwick alleged that she should be classified as an employee of the ride-sharing company and should be reimbursed for expenses, such as mileage and toll fees, incurred while transporting customers.

As with many employee misclassification lawsuits, the crux of the case is whether Uber exerted so much control over Berwick that she does not qualify to be classified as an independent contractor.  Citing Uber’s rigorous background checks and performance evaluation standards, the Labor Commission deemed Berwick an employee. In so ruling, the hearing officer rejected Uber’s contention that it merely acts as a conduit through its cell phone “app” to connect drivers using their personal vehicles with passengers who need a ride.

“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 hearing officer’s ruling stated. The hearing officer dismissed this contention, observing “[that the] reality however, is that defendants are involved in every aspect of the operation.”

Long road ahead for Uber

While the decision is a clearly a setback for Uber, which currently faces several class action from employee misclassification lawsuits, it is not the end of the story. The company has already filed its appeal in a California court. "The California Labor Commission's ruling is nonbinding and applies to a single driver," a company spokesperson stated. "It's important to remember that the number one reason drivers choose to use Uber is because they have complete flexibility and control."

Our employment lawyers will continue to closely monitor the legal developments surrounding the classification of Uber’s drivers. In the meantime, companies in all industries should be wary of misclassification lawsuits involving independent contractors, which have risen dramatically in recent years. For additional legal tips, please see Employers Beware: Misclassification of Workers Is the Focus of DOL Action.