Uber-Successful Digital Business Model May Crash If Florida Court Classifies Drivers as Employees
05.08.17It’s no secret that the multi-billion dollar gig-economy app company has faced its share of speed bumps, roadblocks, and controversies the last several years. As a result of issues with local regulatory traffic laws, rider complaints against drivers for assault and rape, and a sexual harassment scandal, Uber is no stranger to the legal system. But those issues haven’t stopped investment bankers and shareholders from valuing the company at close to $60 billion. However, more recent lawsuits by drivers claiming the ride-sharing giant misclassified them as independent contractors, rather than employees, may threaten the very existence of digitally-based companies such as Uber, Lyft, and Postmates.
The incredibly swift success Uber has experienced is largely attributed to its digital business model, enabling the company to maintain minimal operating costs. By classifying drivers as independent contractors instead of employees, Uber saves millions by not having to pay drivers unemployment benefits, a guaranteed minimum wage, workers’ compensation, sick days, or reimbursement for driving expenses such as mileage, tolls, gasoline, insurance, phone data usage, and vehicle maintenance costs. That’s good for Uber, but some drivers have had enough and are turning to the legal system so they can receive the traditional benefits that come with being classified as an employee.
Not Eligible for Unemployment BenefitsIn February, Florida’s Third District Court of Appeal found that an Uber driver was not an employee for purposes of unemployment benefits. In McGillis v. Dep’t of Econ. Opportunity, 210 So. 3d 220 (Fla. 3d DCA 2017), the Department of Revenue had initially found that McGillis was an employee under Fla. Stat. § 443.1216, but the Department of Economic Opportunity reversed the decision because the services agreement governing the parties’ relationship classified Uber drivers as independent contractors, and the parties’ actual practice reflected that agreement. Id. at 225. The appellate court agreed with this analysis. Id. In Florida, courts first look at the parties’ agreement to determine whether an individual is an employee or independent contractor. Id. at 224.
Next, the appellate court considered ten factors outlined in the Restatement (Second) of Agency § 220, with control being the most important factor. Id. In finding Uber drivers were not employees, the appellate court reasoned that drivers are essentially self-employed business owners because they control the when, where, with whom, and how to accept and perform ride-sharing requests. The court found that not only did Uber not prohibit drivers from engaging in other employment even if that other employment was with direct competitors, but Uber also did not supply drivers with the essential equipment required to perform their job (aka vehicles) or provide direct supervision. Id. at 225-26.