This Significant Omission Demonstrates Why The California Labor Commission’s Ruling Against Uber Is Wrong

The California Labor Commission forgot to mention that drivers are free to work for other companies, like Lyft.

As an attorney and ridesharing proponent, I was interested in seeing how the California Labor Commission (the “Commission”) arrived at its conclusion that Uber drivers are employees, not independent contractors. As you can imagine, the Commission’s opinion (the “opinion”) (see below), yields significant implications for Uber, Lyft, and the rest of “Gig Economy” companies.

Given the gravity of this precedent, one would think they would take care to make sure it was right. Sadly, they did not. The fact section contains obvious errors, such as “Plaintiff estimated she drove 132 hours per day….” (Opinion at 6). This, however, pales in comparison to the fatal error in the Commission’s analysis.

At a face reading of the opinion, I thought the precedent didn’t look too good for Uber. This, of course, prompted me to actually look at the cases referenced in the opinion. I started with Yellow Cab Cooperative v. Workers’ Compensation Appeal Board, 226 Cal. App. 3d 1288 (1991), which the opinion stated was “based on circumstances very similar to those of the instant matter.” (Opinion at 7) (emphasis added).

It turns out Yellow Cab is not similar to Uber’s business model. One could distinguish Yellow Cab on a variety of factors, such as the fact that the cabs were leased, unlike Uber. However, the following quote demonstrates why people who work for Uber, Lyft, and the rest of “Gig Economy” companies are independent contractors.

Although the lease is silent about working for other companies, applicant testified without contradiction that drivers were prohibited from doing so.
Yellow exercised control over various other aspects of the relationship. Perhaps most significant was the prohibition on driving cabs for other companies. A mere lessor has no interest in restricting the lessee’s freedom to render service to another. Nor is the paradigmatic independent contractor bound to serve one principal exclusively. By imposing such a restriction, Yellow exerted a form of control typical of employment and not of other relationships.

Yellow Cab, 226 Cal. App. 3d at 1298 (emphasis added). Uber, unlike Yellow Cab, has no restriction on drivers working for competitors. Indeed, it is very common for drivers to work for Lyft and Uber.

And if that’s not convincing enough, the very next sentence provides further support that Uber’s drivers are independent contractors.

Yellow controlled drivers’ hours by assigning shifts. Yellow imposed this control so that it could lease each cab to more than one driver in one day. This practice resembled a paradigmatic employment relationship and significantly restricted applicant’s independence.

Id. at 1298–99. Uber drivers have no shifts and are free to drive whenever they please. And, because they are driving their own vehicles, there is no pressure to maximize the use of that vehicle on the road. If anything, Yellow Cab supports Uber’s claim that its drivers are independent contractors.

Admittedly, there are factors that favor drivers being considered employees, such as Uber’s ability to remove drivers if they fall below a 4.6 rating or go inactive for many weeks. However, the “most significant” factor— freedom to drive for other companies — points in favor of them being independent contractors.

The opinion is completely silent on that fact. Either the Commission or Uber’s attorneys seriously dropped the ball. Either way, the opinion must reversed on appeal or remanded to make a determination in light of the fact that drivers are free to work for other companies.