New York Uber Drivers Can Collect Unemployment Benefits

Courts and agencies remain divided on ride-hailing drivers’ employment status

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Three former Uber drivers were employees of the ride-hailing service—rather than independent contractors—at least for the purpose of collecting unemployment benefits, New York's Unemployment Insurance Appeal Board ruled.

The board said Uber exercised sufficient control over the three claimants and other similarly situated drivers. At the time the claimants were drivers, Uber disciplined and rewarded drivers based on performance and required drivers to take a road map test and watch an orientation video; set rider fares and driver pay rates; and set music, tipping and deactivation policies.

The ruling means that the drivers can collect unemployment insurance in New York, but Uber still has an opportunity to appeal the decision in state court.

Whether gig-economy workers, such as ride-hailing drivers, are misclassified as independent contractors has been hotly debated for years. For now, drivers' employment status may vary by state and agency. For example, a recent California Supreme Court ruling will make it harder for ride-hailing companies to argue that drivers are contractors under the state's wage orders. However, unemployment agencies in other states, such as Florida, have deemed drivers to be independent contractors and denied them unemployment benefits.

[SHRM members-only toolkit: Employing Independent Contractors]

Whether Uber and other ride-hailing drivers are employees or independent contractors has broad implications, said Michael Passarella, an attorney with Olshan Frome Wolosky in New York City. If drivers are held to be employees, they may have the right to minimum-wage and overtime pay, as well as paid sick leave or paid family leave in jurisdictions that provide such benefits, and to collectively bargain and form a union. These rights and benefits are not available to independent contractors.

The New York decision "shows that Uber's relationship with drivers is exactly like a traditional employer," said Rebecca Smith, a director with the National Employment Law Project (a worker-advocacy group) in Seattle. The company "controls what car drivers use and screens them, trains them, sets their pay, assigns their work, exposes them to constant surveillance and disciplines them for failure to meet Uber's exacting standards."

An Uber spokesperson, however, said the ride-hailing service disagrees with the ruling and is reviewing its options. "We are confident that the ruling uniquely applies to the three claimants, because many of the practices cited in the opinion never applied to one or more of the claimants, are no longer in place or never existed at all."

The Bigger Picture

Employee advocates claim that classifying drivers as employees levels the playing field for workers and other businesses.

Gig-economy supporters argue that the independent-contractor model allows workers more flexibility. But whether drivers are employees or contractors must be measured by federal and state requirements. To complicate matters, the independent-contractor test may vary in a single state from one area of law to the next. For example, the definition of "employee" might be different for unemployment insurance purposes than it is for wage and hour compliance.

The issue of control is one that is central to different agencies' and courts' analyses of employee status, Passarella noted. The New York case highlights that companies in the gig economy—whether in New York or not—need to be careful about exercising too much control over those that provide services.

Employers should always have a written agreement with their contractors, he said. Furthermore, employers should take a look at whether contractors are performing the same work as employees and whether they are able to perform similar work for other businesses. 

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