What is the Uber independent contractor lawsuit?

In a case decided on April 11, 2018, Razak v. Uber Technologies, Inc., a federal judge compared the degree of control Uber has on its drivers to a homeowner imposing limitations on a contracted plumber or carpenter while in the home.

The judge decided that imposing limitations such as restricting fumes, specifying footwear to protect floors, or banning loud music while performing services “does not suffice to conclude that the carpenter/plumber is an employee.”

This marks the first time a federal judge has ruled that Uber drivers are independent contractors under the Fair Labor Standards Act, a decision that could set an important precedent in cases involving Uber and similar companies in the future.

The importance of the Uber ruling

The vast majority of courts that have heard cases in the last decade regarding whether or not a worker had been misclassified as an independent contractor had ruled that the workers were employees. There were a few notable cases in which the court ruled the contrary, but almost all ruled in favor of the workers, and even those that ruled in favor of the company had “close” decisions.

The decision in the case involving Uber, however, was a landmark decision in that the court sided with the company and it was not even close. Some of the factors the judge analyzed included:

  • Right to control: How much control does the employer have over how the work is performed? This is perhaps the most important factor in independent contractor misclassification cases. The court determined Uber does not exercise a substantial amount of control over drivers.

  • Profit/loss opportunity: How much opportunity does a worker have for profit or loss based on managerial skill? The court ruled that the workers’ level of control over their profits and losses indicates they are not employees.

  • Investment: How much is the worker invested in equipment or materials required for the task? The court noted that just because a driver chooses to lease vehicles from Uber does not automatically convert Uber into an employer, which therefore favors independent contractor status.

  • Special skills: Does the service rendered require special skills? The court ruled driving is not a special skill. While this factor would be favorable in finding the workers to be employees, it is also not a factor the court found to carry much weight.

  • Relationship permanence: How permanent is the working relationship? The court determined that because Uber drivers have total freedom to end the relationship at any time or to work as many hours as they wish, there is no permanence to the relationship and thus they are independent contractors.

Outlook for companies built around the “sharing economy”

“Sharing economy” or “gig economy” companies like Uber and Lyft have been fighting for some time to maintain their independent contractor business model, and this case could provide them with the precedent they need to ensure that model adheres to the Fair Labor Standards Act and various state wage laws.

The decision is somewhat limited in that it only applies to cases in which the legal test for independent contractor status is similar to the test applied under the FLSA. It is not uncommon for states to have their own tests for independent contractor status that would differ significantly from the test applied for this case.

Still, it is a big indication of how courts could potentially rule in similar cases involving ridesharing apps moving forward. Uber and other ridesharing companies have faced dozens of lawsuits in recent years claiming its drivers are employees and therefore entitled to all the benefits that come with employee status. This could be the decision those companies have been waiting for.

If you’re not sure whether to classify your worker as an independent contractor or employee, contact an employment law attorney today

For more information about how to classify your employees, call (626) 307-2800 to schedule a consultation with Amity Law Group’s experienced Los Angeles employment law attorneys.


Read More