Uber ruling wobbles contractor business model

US firms driving their apps on the backs of workers who are off-payroll are nervously reading a labour ruling that found an Uber driver was an employee, not a contractor.

In its 21-page judgement, the California Labour Commission said that Barbara Ann Berwick was not a freelancer, as Uber had argued, and was therefore entitled to “business expenses.”

Before granting the driver the green-light to be reimbursed more than $4,000 (£2,500), the commission determined that she was vetted, regulated, controlled and monitored.  

Although the US company yesterday stressed that the ruling is non-binding – and goes against the judgements issued in five similar cases, its implications do not seem insignificant.

“This ruling will have a chilling effect on the entire sharing economy,” says Berin Szoka, the president of TechFreedom, a libertarian IT think-tank.

He added: “The independent-contractor business model helped drive the success of Uber, Lyft, Airbnb, and other sharing-economy companies.

“The Commission’s ruling could force sharing-economy companies to scale back their offerings and increase prices, which could also rob consumers of the flexibility and broad range of choices currently offered by these companies.”

Downplaying the ruling, Uber said that it applied only to a single driver – Ms Berwick, who drove for the ride-hailing service in San Francisco last year.

“It’s important to remember that the number one reason drivers choose to use Uber is because they have complete flexibility and control,” the company added in a statement in response to the ruling.

“The majority of them can and do choose to earn their living from multiple sources, including other ride sharing companies.”

Lawyers for the app told the commission that Uber is a “neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation.”

But the ruling says Uber is actually "involved in every aspect of the operation;" provides an application that is “essential” to the work and has intellectual property, without which Berwick would have been unable to work. Uber says it plans to appeal.