A recent California Labor Commission ruling could threaten Uber's business model.

Former Uber worked labeled employee, not contactor by California Labor Commission

June 22, 2015 4:56 pm Published by Leave your thoughts

Last Wednesday, the California Labor Commission ruled that a former Uber driver who had sued the company should be considered an employee rather than an independent contractor.

While the ruling is non-binding, and Uber is planning to appeal it, it could set a dangerous precedent for Uber, Lyft, and rival app-based service companies.

Uber's business model revolves around being able to undercut major taxi services and provide significantly more affordable services, something that's possible because of the contractor status they give their drivers. If a binding ruling were to consider all of the company's drivers as full time employees, Uber's cost of labor could go up as much as 30 percent from having to pay overtime, Social Security, workers' compensation and unemployment insurance.

An Uber spokesperson's statement on the ruling however, didn't seem particularly concerned. "The California Labor Commission's ruling is non-binding and applies to a single driver," the spokesperson said. "Indeed it is contrary to a previous ruling by the same commission, which concluded in 2012 that the driver 'performed services as an independent contractor, and not as a bona fide employee."

This ruling follows a pair of cases from this past March, when both Uber and Lyft unsuccessfully attempted to argue to separate judges that their drivers were independent contractors. Both judges decided that the cases should go to jury trials. These trials have yet to happen.

Regardless of where you are as a company it's always good idea to get in touch with a qualified business attorney as soon as possible. A good lawyer can make sure your rights as a business owner are protected, and help you better navigate through the nuances of running a business.

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