The Uber Million Dollar Question: Are Uber Drivers Employees or Independent Contractors?
| Citation | Vol. 68 No. 2 |
| Publication year | 2017 |
The Uber Million Dollar Question: Are Uber Drivers Employees or Independent Contractors?
Richard A. Bales
Christian Patrick Woo
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It was a snowy evening in Paris when 2008 LeWeb Technology Conference attendees Travis Kalanick and Garrett Camp were trying to catch a taxicab.1 Frustrated with being stuck in the cold without a ride, the two eventually found a way back to their apartment on the outskirts of the city and started talking with a few other entrepreneurs about potential start-ups.2 Not surprisingly, an idea they discussed that night was a smartphone application, or app, that could pick up passengers the moment they requested a ride.3 Although neither Kalanick nor Camp probably knew it at the time, this simple idea would lead to the creation of Uber, one of the most popular ridesharing apps of the twenty-first century.4
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Since its initial 2009 release as "UberCab,"5 and its subsequent name change to "Uber" in 2010,6 the app that claims to connect passengers to drivers with the "touch of a button"7 has become a worldwide commercial success.8 In 2015, Uber topped the list of 104 venture-backed start-ups, where it was valued at $51 billion.9 It had expanded its reach to more than 300 cities across the globe and had delivered millions of passengers to virtually wherever they wanted to go each day.10 As of 2016, investors valued the company at a whopping $62 billion.11 Although the company took a loss in the first half of that year due to recruiting drivers across the world, increasing marketing efforts, and fighting regulators and taxi companies, Uber "posted significant revenue growth in the second quarter of [2016] . . . including a 31 percent jump to more than $5 billion in second-quarter bookings . . . ."12
Despite Uber's great many successes over the past few years, however, the company has faced several challenges as well.13 In addition to provoking city regulators and causing taxi drivers to take to the streets in protest, Uber has been subject to injunctions in select cities and has been outright banned in other countries around the world.14 Additionally,
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many of Uber's own drivers have filed claims against the company,15 arguing that they are entitled to overtime, reimbursement expenses, and other legal entitlements of being an "employee" of Uber.16
This Article considers whether Uber drivers are employees or independent contractors. First, this Article discusses the Uber app itself, its place in the sharing economy, and the current tests that distinguish employees from independent contractors. Next, it analyzes both Uber's arguments that its drivers are independent contractors, as well as the drivers' arguments that they are employees. After applying today's tests to Uber's business model, this Article argues that the laws do not provide a clear answer as to whether the drivers should be classified as employees or independent contractors. Ultimately, it recommends that the tests be applied on a case-by-case basis to consider the different types of individuals participating in the sharing economy, and that the tests be reconsidered in light of the tension between control and user safety that exists today.
A. Uber Rideshare App
Uber is a rideshare app that can be downloaded on any Android, iOS (Apple), or Windows smartphone, and it connects passengers to drivers using the GPS on the user's phone.17 Through the phone's GPS capabilities, both the driver and passenger can see the other party's location and approximately how long it will take to reach the pick-up point, which can be set by the person requesting a ride.18 Either before or immediately after the driver picks up passengers, passengers can enter a location
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where they would like to be dropped off.19 After the passenger is picked up and the driver drops the passenger off at the desired location, the passenger's credit card—which is entered into the app upon being downloaded—is charged.20
If the passenger requests the ride sometime during the day, the passenger is usually charged a standard fare.21 However, if the passenger is calling for an Uber driver at late hours, on the weekend, or during a national holiday, the passenger is subject to an increased "surge pricing" fare.22 Regardless of the rate at the time, Uber takes a cut for itself, ranging from 5% to 20%, and the rest of the money is directly deposited into the driver's account.23 Therefore, during holidays or weekends, a driver who decides to turn on the app and provide their services can typically earn much more money than someone who drives during the week.24
Depending on location, there are several different Uber car services potential passengers, or "leads," can choose from when requesting a driver.25 The first, "UberX," is a standard four-door sedan service.26 Of all the services made available by Uber, this tends to be the most commonly used and also the least expensive.27 The second service, "UberXL," is similar to UberX except that the vehicles seat at least six passengers instead of four and are generally minivans or SUVs.28 Third, "UberSelect"—formerly known as "UberPlus"—is the luxury sedan service, and features
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cars from makers such as Audi, BMW, and Mercedes.29 The fourth service, "UberBlack," is Uber's "executive" luxury service and typically features drivers in black SUVs and luxury sedans.30 Not surprisingly, UberBlack is Uber's most expensive widely offered service.31 Uber's last and most recent service is "UberPool," which allows leads to share their rides with others—usually strangers—and then split the cost together.32 At the time the passenger requests a driver, he or she can choose from any of the services available.33 Regardless of which service is selected, if passengers are with a group of friends, for example, they are able to split the Uber fare evenly—as long as every passenger has already downloaded the app.34
Turning from the passengers to the drivers, Uber allows virtually anyone to drive for the company as long as a few minimal requirements are met.35 These include passing both a background and Department of Motor Vehicles check, owning a vehicle, and having car insurance.36 Additionally, depending on what level of service the driver is providing, the driver must give at least one ride within a given amount of time.37 Because these minimal requirements are all that is required to drive for Uber, a wide variety of people perform the job.38 For example, a passenger's first driver one evening may be a part-time biomedical engineer, while the second driver providing the ride back to the passenger's home may utilize Uber on a full-time basis to support his family of five.39
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In addition to the ease of becoming an Uber driver, perhaps what makes Uber so popular is the tremendous amount of flexibility offered to its drivers.40 Because Uber drivers use their own car and can turn on the app at virtually any time—whether it is six in the morning or six in the evening—they can set their own schedules and drive whenever it is most convenient for them.41 Turning back to the previous example, someone who is working as a part-time biomedical engineer may only drive for a few hours on the weekends or whenever they are off-duty or taking a break, whereas full-time Uber drivers who support a family of five may drive from 9:00 AM to 5:00 PM, Monday through Saturday, so they can spend Sunday with family.42 Based on all of these features, Uber has created an app that serves a dual role as both a referral and transportation service, making it one of the most popular rideshare apps in the sharing economy today.43
B. Uber's Place in the Sharing Economy
The sharing economy is subject to multiple definitions and has been called many different names, such as "'collaborative consumption,' 'asset-light lifestyle,' 'collaborative economy,' 'peer economy,' and 'access economy.'"44 However, many authors who have written on the subject agree that the sharing economy generally refers to an economic system built around unutilized human and physical resources during certain times of the day.45 In other words, businesses that rely on the sharing economy
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take advantage of "underutilized space, skills, and goods by 'matching providers who have specific assets or skills with the people who need them'" the most.46 Although the concept of the sharing economy has existed long before the birth of the Internet, the Internet is "responsible for substantially reducing information costs, resulting in the sharing economy's transformation and dramatic expansion" to what it is today.47 More specifically, because the Internet gives smartphone users "the ability to quickly communicate through [their phones] and peer-to-peer programs, owners of . . . unused resources now have the means to connect them with consumers," there has been an increase in the number of apps that thrive under the sharing economy.48
This is where Uber comes in.49 Recognizing the frustrations of not finding a ride as quickly as one would like,50 the underutilization of many resources,51 and the capabilities of modern technology,52 Kalanick and Camp created a rideshare app that has allowed millions of people to thrive in today's sharing economy.53 For instance, imagine a situation where a sales associate at Walmart is off-duty for a few hours and wants to make some additional money driving for Uber.54 Whenever the associate is off-duty, he or she could access the Uber app to see if anyone in the surrounding area needs a ride.55 If there is someone in need of a ride, the associate could then drive the car that he or she uses to get to work to take the leads wherever they need to go. Thus, through the Uber app, the sales associate working at Walmart is able to profit from his or her...
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