The Decision That Could Change The Way Uber Does Business [e199]

June 22, 2015

Nasir and Matt discuss the decision handed down by the California Labor Commissioner that classified an Uber driver as an employee instead ofan independent contractor.

Full Podcast Transcript

NASIR: All right. Welcome to our Uber podcast where we cover business in the news and add our legal twist. My name is Nasir Pasha.

MATT: And I’m Matt Staub.

NASIR: I hate how “uber” is an adjective as well as a company. I don’t like the company. I don’t like the adjective.

MATT: Well, I don’t know, I mean, I guess there’s probably some sort of connection to why they named it what they did, but I don’t know if it really…. I don’t know if they… I don’t know. I don’t know. I can’t wait to read that transcript back when I just say “I don’t know” five times in a row.

NASIR: In fact, that’s the only reason we have a transcript – to laugh at you.

MATT: She could always cut it out I guess and make me look a little bit more intelligent.

NASIR: No.

MATT: Yeah, this is a double whammy because we’re talking about two things you don’t like – Uber and the whole independent contractor employee issue. If this podcast was live, we would be hitting the front page here because we’re quick to the scene but I guess, by the time this comes out, it’s going to be pretty delayed but that’s all right.

NASIR: Unfortunately, but that’s okay, yeah.

MATT: This shouldn’t be anything too big that happens legally between right now and when it comes out since they’re filing the appeal and waiting.

NASIR: That’s true.

MATT: Just different takes, I guess.

NASIR: So, what’s the news?

MATT: So, yeah, what happened exactly, decision handed down by the California labor commission. Long story short, one of their Uber drivers, she got this complaint trying to get unpaid wages reimbursement for expenses, liquidated damages, waiting time penalties – which what we just talked about recently – but she brought this against Uber and the California labor commission determined that she was, in fact, an employee of Uber and not an independent contractor like every single driver up until this point has been classified. In fact, they have a big group of I think over 1,000 employees in San Francisco but, other than that, that’s pretty much it, right? I mean, all of the drivers have been classified as contractors.

NASIR: Yeah, and when you say 1,000 employees, you’re not talking about the drivers. You’re talking about actual employees – probably in offices somewhere.

MATT: Right.

NASIR: So, when we’re reading this – and we’ve been talking about this – besides the independent contractor versus employee issue – we’ve been talking about that since the beginning of the podcast – but even the Uber issue, we’ve talked about class action lawsuits against them, we’ve talked about a bunch of cases against them. I’m pretty sure this is the first case – and I use the word “case” kind of lightly here and I’ll tell you why in a second – that has classified one of their drivers as an employee and the internet is going crazy off of it and I think it’s fair to start out with what’s Uber’s response in the statement because I think it’s very accurate and they say that the California labor commission’s ruling is non-binding and applies to a single driver. Let’s talk about what that means and I think this is important for those in California but also in other states that have administrative hearings which is basically this employee went to the California labor commission and, through their administrative hearing, you know, if you talk to any litigation attorney, it’s a very loosey-goosey kind of atmosphere. The rules of evidence aren’t as strict. You don’t actually need an attorney to represent you. I wouldn’t even be surprised if an attorney wasn’t representing the driver here.

MATT: Yeah, she was pro per.

NASIR: There you go and that’s not surprising. I think that employers should be conscious of this that, if you do have a violation, it’s not as if there’s this huge burden for employees in California – and in other states, by the way – to actually file a claim against you. They don’t need to pay an attorney thousands of dollars just to get so-called justice. But here’s the catch, okay? Once the labor commission rules, Uber has an opportunity to an appeal and because usually that requires you to post a bond and so forth, you do get a new trial but because of that bond issue it doesn’t end up worth it because you have to pay for attorney’s fees. Also, if you lose, then you have to pay the other party’s attorney’s fees. But, for Uber, this is a big issue. I mean, this is like the holy war that Uber’s trying to fight so they’re going to appeal. I mean, there’s no doubt about it and it’s worth their cost.

MATT: Well, to go back to the actual decision, what does this mean? Well, this means that she’s entitled to $4,152.20 – that’s what she was awarded as a result of this decision. From a small scale perspective, who really cares? I mean, she’s getting that and it’s mostly reimbursable business expenses and the rest is just a few hundred dollars of interest.

NASIR: Yeah.

MATT: But, as you said as a whole, and I believe the appeal has been filed, I want to say, by Uber, now, to be filing that, they must be confident that they’re going to be able to get this decision reversed because, if not, they’re going to be setting a precedent – at least in California – that these drivers – or at least the way they’re treating them or they’re treating her and I assume that’s how they treat all of them is – our employees, and that’s going to be a huge issue for many reasons like we’ve explained in the past.

NASIR: Absolutely. If she doesn’t have an attorney now, she better get one because it’s an actual whole new trial. The old ruling pretty much doesn’t matter and that’s significant on Uber’s perspective because they get a whole new crack at the – well, I’m trying to look for an idiom – crack at the whip or another time at bat – what’s the…?

MATT: You said the bat thing because you’re thinking about our baseball story coming up later in the week.

NASIR: That’s true.

MATT: There’s probably some sort of car one you could have used.

NASIR: So, that $4,000 or so reimbursable expenses, I think she lost… is this a she?

MATT: Barbara Ann – I would assume so.

NASIR: Barbara is a guy’s name, right? He? No.
Actually, I think she lost on the minimum wage claim. Everyone’s talking about this ruling but no one actually has all the details. I haven’t seen any actually published documents or rulings on that as to why they lost in the minimum wage claim, but I suspect that they’re actually making more than minimum wage if you add it all together. Whether that’s true or not, I think that’s case by case. We’ve seen cases where, you know, people are making less than the minimum wage effectively. And so, that may be the reason why she may have lost on that. So, we’ll see what happens but I have said this in the past; I think that all these people that think that Uber drivers are employees are incorrect on a legal basis. I was pretty surprised from this labor commission ruling and I think even Uber mentions in their statement that this same administrative body actually ruled in favor of Uber not too long ago – in 2012 – on this same issue. And so, I’m as surprised as they are and I don’t think, if this goes to an appeal, that Uber’s going to lose on this issue.

MATT: You would think that but who knows with what we have seen? I mean, because I know you don’t like Uber, but the statement they issued, I agree with it. I’m looking at some of the facts, and I don’t know if this is all the facts they decided upon, but they noted that the company provided her with a phone. It had a policy of deactivating the app that’s used if drivers weren’t active for 180 days. I mean, if that’s the sort of facts that led the labor commission to decide she’s an employee, that’s pretty ridiculous.

NASIR: I didn’t know they actually provided phones. That’s one small factor as to them more likely being an employee than an independent contractor because, if the worker is providing their own equipment such as their own car, their own phone, they’re more likely to be a contractor because there’s less control but it’s the other way around and now – you know, we’ve talked about it in the past – Uber is leasing cars now to their drivers and now you’re saying they’re providing phones. You’re right, that’s another fact that goes into the employee bucket.

MATT: Yeah. I mean, I just want to get to one of the statements from the decision, too – at least this is what’s quoted. “Uber holds themselves out as nothing more than a neutral technological platform designed simply to enable drivers and passengers to transact the business of transportation.” In reality, however, Uber is involved in every aspect of the operation which, I mean, I guess kind of but, as far as I know, the drivers are free to work when they want and turn the app off and on when they want, pick up a ride. I mean, I don’t know how the actual process works.

NASIR: Yeah, I don’t know even think there’s a schedule. I mean, you can literally decide to work whenever you want and that’s the whole nature of the surge pricing to encourage drivers to get on the road and so forth, right?

MATT: Yeah, and it’s funny how this works because I’ll be actually taking an Uber tomorrow.

NASIR: Again?! Oh, my gosh…

MATT: It’s funny because every time we talk about it seems to be the day before or the day I’ve actually taken Uber. But, the last time, we recorded and it was fresh in my mind because it was like an hour or two later and I asked the driver like if he had any sort of schedule he had to abide to. He said, “No, I just… You know, I work when I want to,” and he’s like, “I don’t know how they necessarily do the whole…” because, obviously, there’s going to be times when people are going to be working less, but I guess in the cities, there is enough people working at every time where it’s not an issue. I mean, now we’re getting into supply and demand.

NASIR: That’s the whole thing of surge pricing, right? So, if there is not enough cars on the road and there’s a lot of people requesting drivers, then they’ll increase the fare so that encourages drivers because they’ll make more money per hour per fare,

MATT: I wonder if it sends a push notification to the drivers in the area when prices are surging to get them to…

NASIR: Yeah, that’s true, I don’t know. The drivers have to somehow be notified that the price has increased or decreased or whatever. But, anyway…

MATT: Oh, I was just going to tell a quick funny story when I took an Uber in Boston, it was an Uber X and the woman was saying the only reason she was doing it is because she wanted to pay off her car as quickly as possible. She only got a one-year loan and then she was using all the Uber proceeds, blah blah blah. I was like, “Well, you’re just driving your car. You’re putting a ton of miles on your car in the process.” I don’t know if this is the best business decision but I guess, if you can pay off your brand new car in a year, then maybe it’s worth it but it’s like, “You might want to think about all the factors that play into this.”

NASIR: But we talked about this. I really feel that these drivers are put into a vulnerable position which is why I feel that, if we can apply the franchise law to Uber, that’s the best way. I mean, all these lawsuits, at the end of the day, everyone’s trying to fix some problems or some gaps in the market because they feel like drivers are being taken advantage of and I feel like this can be solved if some attorney out there that’s clever enough – and I’m not the person to do it – that applies a franchise law to them that basically Uber has to have all the disclosures that are required so the drivers can make an educated decision. A lot of times, we’ve encountered drivers that have come to us and basically they’ve leased a car from Uber and now they were sold this dream that they would make all this money and they realize, “Okay, it’s not that easy,” and now they’re having trouble making payments to their vehicle and they’re in a lease and so they can’t just break it. I don’t know all the details but people get into those situations and there’s different anecdotal situations like that. I’m sure there are success stories – I’m sure there’s plenty – but there’s also the opposite as well.

MATT: And we should keep in mind too that there’s still that class action lawsuit that’s still out there and hasn’t been decided yet. I mean, that’s going to have a much bigger reach than this small decision.

NASIR: I still think that they’re going to lose. We talked about this – the recent appeals court case with FedEx. It was a big loss for FedEx because they incorrectly classified their drivers as contractors and the court said that they were employees. But the reason they said that is like, for example, they had FedEx uniforms, they drove company vehicles, they had to groom themselves in a certain way, I mean, that is control. Compare that to taxi drivers – a very classic model where a lot of taxi drivers lease their cars, et cetera, and are independent contractors, and there’s been cases that have gone the other way where taxi drivers have been found employees, but it’s because they had other factors. But, to be frank, there’s quite a lot of law on this issue and, obviously, I was wrong here with the labor commission but I think, for the most part, if you were a betting man, it’s pretty easy to say that they’re most likely going to be ruled as independent contractors by any court.

MATT: As far as I know, Uber’s not hiding the ball on this. I mean, the drivers are entering into this arrangement with the understanding they’re independent contractors and not employees. I don’t get why they’re needing to bring suit afterwards. I guess they’re just frustrated with the overall. They thought it was going to be much better, like you said, but still… in the office I work at, they used to hold meetings all the time for people that are interested in being an Uber driver. I should have sat in on one of them to see, but I imagine they really don’t want people to think they’re employees. It’s like this crept up on these drivers and they should be surprised.

NASIR: Yeah.

MATT: And, just to follow up on the minimum wage thing, I haven’t had a chance to review everything but basically the labor commission decided or held that plaintiff has presented no evidence of sufficient substantiality to support her claim for additional wages or minimum wage.

NASIR: Yeah, and that may be a driver’s fault and being able to present a case because she wasn’t represented.

MATT: I guess, yeah, the facts might have been there. It could have been favorable to her but she just didn’t present enough information for it to work out. That’s very possible.

NASIR: And I don’t know the fact of this but there may be a chance that she may be able to bring that issue up again. I’m not sure because, from what I recall, it’s a case de novo which basically means it’s pretty much restarting whether she’s barred to bring other issues like the minimum wage issues or not. I think she can. But, nonetheless, let’s think about this practically. If the superior court of California and wherever this is at, whatever location, they rule in this driver’s favor. Uber is going to appeal again. It’s going to go to the public court and then, if it rules against Uber again, it goes to the Supreme Court. Even if it rules against Uber in the Supreme Court, the impact of that is much more than just Uber and I think all these articles that everyone’s talking about is like, “Oh, Uber will be shut down in California if their workers are considered employees because their model cannot sustain that kind of change. It doesn’t work that way.” But my point is that it would not only affect Uber but it would affect Lyft, it would affect all the taxi cab drivers, it would affect all the independent contractor models that are very similar to this – which there are a lot. And so, I just don’t feel like you would really have to stretch the definition of a contractor to fit or to an employee to fit Uber drivers in it. That’s why I just feel like even politically I don’t see it ever happening.

MATT: I’ve never seen this phrase before but one article coined it “the 1099 Economy” which relates to 1099 – if you’re a contractor, you get a 1099 miscellaneous.

NASIR: The 1099 miscellaneous economy?

MATT: Yeah. I mean, you’re right. It’s not going to affect just Uber. Uber has a sizeable share of this particular market but it’s examples like Postmates which will deliver pretty much everything. I mean, really, really a lot of different businesses would be affected by this so I think you and I were both a little bit surprised of this decision but I think we’d be extremely surprised if it gets appealed and Uber loses again – loses as in it gets classified as employee.

NASIR: And, by the way, it does look like they have filed already in the county of San Francisco, June 16th 2015 which was yesterday as recording.

MATT: That’s what I was saying at the beginning of this. They felt pretty confident they were going to win because, appeal and lose, you’re setting a bigger precedent but…

NASIR: Yeah, you’re right. There is a risk because – you’re right – it’s the superior court, that doesn’t necessarily have binding law to everyone else, but once it gets appealed, if they lose – which they will appeal – then we’re talking about, okay, actually creating a law which would affect other drivers. It’s not going to be an immediate effect because it’s not a class action lawsuit or anything like that but it would change the law and would have an impact throughout the state.

MATT: If Uber sued Yelp, who would you root for?

NASIR: Ooh, that’s a good question.

MATT: A mistrial.

NASIR: If it was a boxing match, I would say Uber because Uber is a little dirtier in their tactics. If it was like a who would I want to win, I would probably say me.

MATT: You think Uber is dirtier in its tactics than Yelp is?

NASIR: Well, yeah, to its competitors.

MATT: I’d go the other way.

NASIR: I mean, to its competitors. If you think about it, I mean, look what they did to Lyft and what they alleged to have done to those journalists in Chicago or something – I can’t remember the details. I mean, we’ve gone over this.

MATT: Now we’re talking about business to consumer issues versus business to business because Uber is only going after business. Yelp is all about the consumers. It sounds like you have more business support than consumer support which is probably right.

NASIR: Yeah, but Yelp’s against the businesses too, right? I mean, that’s our criticism of Yelp, too. Well, let’s just say they’re both horrible and, I agree, I guess mistrial then.

MATT: Fair enough – undecided.

NASIR: Undecided, yeah. They’re both guilty. How about this? Who would you rather work for if you had to work for one of them – Uber or Yelp?

MATT: Uber, easily.

NASIR: Easily? Ah, maybe you’re right.

MATT: I don’t even know… is there a corporate office in Silicon Valley as well? I don’t know.

NASIR: I thought you were going to ask like, “Is Yelp hiring though?” As if it matters. Anyway, I think we killed this Uber thing for a while. I mean, I don’t think there’s going to be any big new information for a while. This case, we’re probably going to have to revisit it unless it’s settled a year from now.

MATT: Well, I don’t know it’s going to settle. I mean, she won $4,000.

NASIR: Yeah, you’re right, it’s not going to settle because they would have paid it earlier then. They don’t want to create precedence like that, for sure – unless she drops the case, I suppose.

MATT: Yeah.

NASIR: All right. Well, I think that’s it. Thanks for joining us.

MATT: Keep it sound and keep it smart.

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Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
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Nasir and Matt discuss the Baltimore law that makes it very difficult to operate food trucks in the city. They also discuss all the legal restrictions tohaving a food truck.

May 11, 2016

Matt listens to Nasir recap the developing battle in his hometown of Vandalia, Ohio over whether a Dunkin Donuts can move into a location in close proximity to a local favorite donut shop. They then discusswhether the issue is more legal or personal.

May 9, 2016

The guys kick off the week by discussing a Nevada employee who is claiming she was fired for not supporting the Scientology beliefs of her employer.

April 27, 2016

The guys discuss the massive floods in Houston,how employers responded, and why one meteorologist became a local hero. They also discuss the steps businesses should take in preparing for storms outside the workplace.

April 20, 2016

The guys discuss the boycott of Amazon over the products of an unnamed presidential candidate. They also talkabout how a business should handle a boycott and whether it’s possible to exit one unscathed.

April 13, 2016

Click here to read HubSpot’s response on this topic. Nasir and Matt discuss the trend in startups to compensate programmers and other early employees with stock options and how the company culture at HubSpot isn’t what it seems.

We represent businesses.
That’s all we do.

Oh, and we love it.

We love our work. We love reviewing that lease for your new location. We thrive on closing that acquisition that nearly fell through. We’re fulfilled when we structure a business to grow, raise capital, and be legally protected.

We focus on developing close relationships with our clients by being like business partners. A partner who provides essential, personalized, proactive legal support.

We do all of this without utilizing the traditional billable hour model. You pay for the value we bring, not the time spent on calls, emails, and meetings.

Our team is made up of attorneys and staff that share these values and we are retained by clients who want the same.

Pasha Law PC operates in the states of California, Illinois, New York, and Texas.

Meet Our Team

Fractional General Counsel Services

Pasha Law Select offers the expertise of a high-end general counsel legal team for every aspect of your business at a fixed monthly rate. Pasha Law Select is deliberately designed to allow our legal team to be proactive, to anticipate, and to be comprehensive in serving our clients. To be great lawyers, we need to know our clients. We can’t know our clients unless we represent a select number of clients in the long-term. This is Pasha Law Select.

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