New England Insurance Agent Blog

Uber: Drivers, Drivers Everywhere, but No Employees in Sight
/ Categories: Workers' Comp

Uber: Drivers, Drivers Everywhere, but No Employees in Sight

The Uber business model, like that of FedEx, defines the company's drivers as independent contractors. To some degree, the drivers are indeed independent: they set their own hours, determine their own routes, and drive their own cars. Compared to FedEx drivers, Uber drivers operate with considerable autonomy. They are independent in all but one critical matter: without these "independent" drivers, Uber does not exist. The fundamental purpose of the business is to move people from point A to point B, just as the purpose of FedEx is to move packages. These cutting edge companies have honed their workforces to the bare minimum by "outsourcing" their primary work - and they are saving a lot of money in the process.

As independent contractors, Uber drivers are not protected by fair wage standards, they are on their own for health insurance, there are no paid vacation, sick leave or holidays and, near and dear to this writer, there is no coverage for workers compensation. As they prowl the streets of major cities, waiting for the iPhone ding that signifies a customer, they are on their own. Their Uber engagement begins when they pick up a customer and ends with the drop off. They are responsible for tolls, for moving violations and parking tickets.

A recent case before the California Labor Commission has found that Barbara Ann Berwick, an Uber driver, was indeed an employee and has ordered Uber to pay Berwick about $4,000 for mileage and tolls. This is chump change to a billion dollar company, but the principle is what matters: Uber is appealing the finding,taking the case from the commission into the courts. If California judges pursue the "fundamental purpose" argument (as they have done with FedEx), Uber might be in a little trouble. Then again, with FedEx as their model, Uber can tie the case up for years in appeals.

With Uber and FedEx, among many others, the concept of employment has undergone a radical change. Companies are seeking ways to get work performed without establishing an employer-employee relationship. The usual protections and benefits afforded employees are off the table. The cost of doing business is far less than it is for conventional employers. It's profitable, for sure, but its legality - to say nothing of its fairness - is yet to be determined.

- Jon Coppelman

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