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In California, a Commissioner has said that an Uber driver who connects with his customers through the Uber app must be considered to be an employee. This means that Uber drivers are now eligible for reimbursements for expenses and for the minimum wage.

Uber is a service where drivers can pick up passengers using their own car.

Uber claims that their drivers are independent contractors and not employees as they perform as much or as little work as they want to.

A California Labor Commissioner found that a San Francisco based Uber driver should have been treated as an employee, and not an independent contractor. The decision considered the degree of control that Uber has over the drivers. Particularly that:

• Drivers must pass background and DMV checks;
• They must register their cars with Uber;
• Cars must also be less than 10 years old;
• Uber drivers achieve passenger approval ratings and scores must not fall below a certain score;
• Uber sets the price for each trip;
• The driver receives a non-negotiable service fee.

In the decision it was noted that given Uber is involved in every aspect of the operation and the driver did not have enough work freedom to be considered an independent contractor.

As a result of this decision, other businesses, in what is now known as the “sharing economy” who have similar arrangements with people, will need to seriously consider their working relationships and determine whether or not these people are in fact employees.

For businesses in Australia, it is important that before entering a principal contractor arrangement that proper legal advice is sought. There are a number of cases where businesses thought they were conducting a proper business relationship with contractors only to subsequently find out that the relevant people were actually employees for the purposes of tax law and/or employment law.

In addition to considering the degree of control, Australian courts also look at other factors to determine whether or not there is/was a principal/independent contractor relationship. Such factors include (but are not limited to):

• Does the person supply/maintain tools or equipment?
• Do they work standard hours?
• Are they paid according to task completion rather than receiving wages?
• Do they incur any loss or receive any profit from the job?
• Is the person free to work for others at the same time?
• Do they have the right to employ or subcontract any aspect of their work to another person?
• Is tax deducted from the persons pay?
• Does the person provide their own public liability insurance?
• Does the person render tax invoices for payment?
• Does the person file GST returns?

As Uber has discovered in California, simply labelling a relationship as a “contractor” relationship does not make so at law.

Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog, or from links on this website to any external website. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.