Update: Calif. decision could undermine Uber's business model

A Uber driver has been deemed an employee by California Labor Commission

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In a decision that could have major implications for the way Uber does business in its home state, the California Labor Commission has ruled that a driver was an employee when she was driving for the company.

Uber has always claimed that its drivers are contractors, a classification that means Uber doesn't have to provide them multiple employment benefits, but the ruling challenges that assertion.

The decision was reached earlier this month by the labor board after a hearing on a dispute between a former Uber driver, Barbara Berwick, and Uber. Berwick had sued Uber, claiming she was owed unpaid wages, car expenses and interest.

The decision became public on Tuesday when it was filed with the state court in San Francisco. It was first reported on Wednesday by Reuters.

"Defendants hold themselves out as nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation," the California Labor Commission wrote in its finding. "The reality, however, is that defendants are involved in every aspect of the operation."

It said that Uber vets drivers and approves them, controls the cars they drive, monitors their ratings, manages their access to the Uber app, and controls the amount of money they can earn by setting rates.

Therefore, the labor commission ruled, the driver was an employee of Uber.

As a result, the court ordered Uber to pay the driver for the miles she drove as an employee, at the Internal Revenue Service auto reimbursement rate of 55 cents per mile. It also ordered Uber to pay the road toll charges she incurred while working for Uber.

With additional interest, Uber was ordered to pay $4,152.

Uber has appealed the ruling.

In a statement, the company noted a 2012 ruling by the same labor commission which found a limo driver was a contractor and not and employee. In that case, the commission said Uber was engaged in technology and not the transportation industry.

"Five other states have also come to the same conclusion," the company said. "It's important to remember that the number one reason drivers choose to use Uber is because they have complete flexibility and control. The majority of them can and do choose to earn their living from multiple sources, including other ride sharing companies."

The ruling follows a similar one last month in Florida, where the Department of Economic Opportunity ruled that an out-of-work Uber driver is an employee and so can collect unemployment insurance. The driver's account had been deactivated by Uber following a disagreement over damage to his car leading the driver to pursue a claim for unemployment benefits, according to The Miami Herald.

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