Thursday, March 12, 2015

Can I Get an Uber Update?

Last November, I penned Can I get an Uber Lift about the development of "ride-sharing" companies. These arrangements are discussed at national workers' compensation conferences. There is a debate raging as to whether drivers involved with these companies are employees or independent contractors. 

WorkCompCentral recently reported further developments on the horizon. It appears that California may be center stage for some of the debate regarding these "ride-sharing" applications. It reports that the "California Public Utilities Commission voted last year not to force ride-sharing companies to buy workers’ compensation insurance for its drivers." Thus addressing a regulatory challenge for the process. There is a requirement that the companies buy liability insurance. 

However, now the industry is facing federal litigation, and thus facing similar classification questions in a non-regulatory setting. WorkCompCentral reports that Cotter v. Lyft Inc. and O'Connor v. Uber Technologies have been filed in the U.S. District Court, Northern District of California.

The plaintiffs seek "reimbursement of mileage and application of minimum wage standards." In that context, the drivers associated with these two services are "seeking status as employees, which would make them eligible for workers’ compensation benefits."

So, states continue to struggle with whether and how to regulate the new paradigm that is "ride-sharing." The Fair Labor Standards Act (FLSA) and the minimum wage, however, will be interpreted by the court. The conclusion under that law of "employee" or "independent contractor" may not be the end of the analysis. Arguably such an FLSA determination may not bind state regulators regarding the appropriate label under state law for purposes such as workers' compensation. 

However, it will bring an interesting perspective to the debate as to what these companies are and how their drivers are appropriately classified. Are they "employers" or merely communication service providers? They claim they merely provide services, that connect drivers with riders. 

The article posits that the FLSA debate will focus in large part on the issue of how much control is exerted by the "ride-share" companies over these drivers. There may be a comparison with other transportation industry classifications, particularly noted is the litigation in which "FedEx Ground has lost major battles in the U.S. 9th Circuit Court and Kansas Supreme Court this year when judges ruled that thousands of the company’s delivery drivers were employees."

WorkCompCentral points out that these questions are likely to face a variety of regulators. They note that the "ride-sharing" paradigm is rapidly growing. Two companies are featured in the article, which notes that last year Lyft reported "that it grew its ridership fivefold in 2014 and expanded from 15 cities to more than 60." The other provider, Uber, "boasts on its website that it offers services in more than 260 cities in 54 countries." 

It is an issue that concerns the drivers and the "ride-share" companies. However, the insurance industry may also seek clarification. The industry recognizes "misclassification is a major issue in workers’ compensation because it denies insurance carriers the ability to properly gauge risk." If the drivers are employees, then carriers may be liable to provide benefits. It that is to be the outcome, payroll will have to be valued, and premiums collected.

More recently, Montana undertook consideration of a statutory amendment to dregulate taxi companies. This would apparently pave the way for Uber, Lyft, and others. By passing a state law on the subject, Montana would also preclude cities or localities from banning these services. There could be significant revenue concerns for municipalities if they lose fee-paying cab service providers as a result of these services.

It may be that the questions of classification for "ride-sharing" drivers may be coming soon to a legislature or regulatory agency near you. Because of the various definitions in state statutes and regulations, the regulatory outcome of this debate may not be consistent across the continent. With the employee/contractor questions currently in a federal court, the FLSA treatment of the Uber-driver may be clear soon. As it would be a federal decision, that might provide consistency at least in the wage context. 

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