California's labor commissioner ruled Wednesday in favor of a Bay Area Uber driver that she is an employee of the company, not an independent contractor as Uber claims of its drivers. This changes everything for Uber's business model, LA Times business columnist Michael Hiltzik writes. The ruling found that Uber retains too much control over drivers, and their labor too basic to the business model, for Uber to get away with no paying their expenses and complying with standard California rules such as overtime pay.
"Sharing economy" firms like the car services Uber and Lyft have always been based on something of a sham: the idea that the drivers are working for themselves, not for the bosses.
That concept is so alluring, on the surface, that it has spread to house cleaners, launderers, delivery persons -- you name it. But it's fundamentally false, and the California office of the labor commissioner on Wednesday blew a big hole in it.
It may also have blown a hole in Uber's venture capital valuation, which was last quoted at about $50 billion.
In March, U.S. District Judge Edward M. Chen called Uber's claim to be a technology company first "fatally flawed in numerous respects….Uber does not simply sell software; it sells rides. Uber is no more a 'technology company' than Yellow Cab is a 'technology company' because it uses CB radios to dispatch taxi cabs."