Uber appeals ruling that threatens business model

A US commission has issued a ruling that could have major implications for Uber and other on-demand service providers, finding that Uber drivers should be classified as employees.

Uber is appealing a California Labor Commission order for the company to pay a former Uber driver around US$4000 in expenses, The New York Times reported.

The appeal drew attention to the fact that the commission found in favour of the former driver earlier this month.

Uber positions itself as a neutral technology platform merely connecting independent drivers with those seeking transportation services. But the commission found that the company acts more like an employer, being involved in every aspect of the transaction, and should be considered as such.

Uber also issues its drivers with phones and deactivates drivers if they have been inactive for more than 180 days.

The verdict could have a severe impact on Uber's operations. Its rapid growth is down to its ability to undercut established taxi companies, in large part because it does not have the expenses of having to pay its drivers salaries and benefits.

Numerous other on-demand service providers in multiple industries have sprung up with the same model, and requiring them to class their contractors as employees could impact all of these.

Uber insists that the California Labor Commission's decision is non-binding and applies only to a single driver. But the appeal appears to be aimed at preventing this case from setting any kind of precedent.

Image courtesy of Matteo Doni under CC