New York just made the case that two former Uber drivers should be treated as employees

Getting There
Getting There

Uber’s legal woes with its drivers are far from over. In August, a federal judge rejected a proposed $100 million settlement with drivers in California and Massachusetts who claimed they should be classified as employees instead of independent contractors. Earlier this month, a case alleging Uber’s five-star rating system is racially discriminatory advanced before the Equal Employment Opportunity Commission.

The latest wrinkle comes from New York, where state regulators have determined two former Uber drivers are eligible for unemployment payments. The crucial subtext: Those drivers are being classified by the state as employees, not contractors.

Levon Aleksanian and Jakir Hossain both filed for unemployment benefits last year after being “deactivated”—Uber-speak for fired—by the ride-hailing company. Such applications are supposed to take three to six weeks to resolve, but Aleksanian’s and Hossain’s remained in flux for months for unexplained reasons. This July, the New York Taxi Workers Alliance, which advocates on behalf of for-hire drivers in the city, sued the state for “refusal to investigate or adjudicate complaints for unemployment insurance benefits.”

Aleksanian was notified of his eligibility for benefits in early August (up to $420 per week), and Hossain late last month (up to $353 per week). The state’s determinations, first reported by the New York Times last night, are narrow in that they apply only to the two drivers’ unemployment insurance claims and do not extend to other drivers who work for Uber.

Even so, the rulings could prove significant. Workers advocates are hailing them as a “game-changing” victory and hoping to push the state toward similar determinations in the future. The New York Taxi Workers Alliance is calling for the labor department to “conduct a comprehensive audit of Uber to determine all workers as employees and therefore eligible for unemployment benefits and protected under wage and hour laws.” Catherine Ruckelshaus, general counsel for the National Employment Law Project, said in a statement that the determinations “should put an end to Uber’s charade that its drivers are not employees.”

Uber has walked a fine line in New York, where its service is legal only in New York City, and only under the strict oversight of the local taxi authority. While New York is among Uber’s biggest US markets, the company has fought bitterly with the powerful taxi industry and failed repeatedly to get ride-hailing extended to the rest of the state.

Uber said in a statement that it has appealed the determinations, and noted that the New York labor department has on several other occasions found its drivers to be independent contractors. “As employees, drivers would lose the personal flexibility they value most,” Matt Wing, an Uber spokesman, said. “They would have set shifts, earn a fixed hourly wage, and be unable to use other ridesharing apps.”

Treating workers as contractors rather than employees is vital to Uber’s business model. It means Uber doesn’t have to provide drivers with the benefits of a traditional corporate job, such as health care and retirement plans, or even pay them a guaranteed minimum wage. Companies that follow this model are estimated to save as much as 30% on labor costs. For Uber, another benefit is that contractors are required to pay their own on-the-job expenses, which for ride-hailing includes everything from gas to car insurance. All of that helps Uber keep costs low, fares cheap, and thin margins viable.

In California, at least two Uber drivers have been deemed eligible for jobless benefits in recent years, though others have been ruled independent contractors. In another particularly high profile case, the California Labor Commission last summer found former Uber driver Barbara Ann Berwick to be an employee of the company and awarded her roughly $4,000 in unpaid expenses. Uber has also appealed that decision.

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