Uber Faces Employee Ruling by California

UBERThe California labor commission has ruled Uber drivers are employees, Reuters reports. The decision was made after a San Francisco driver, Barbara Ann Berwick, filed a claim against the company. The commission sided with her largely because it deemed Uber was “involved in every aspect of the operation.”

It’s potentially a huge blow to Uber’s business model, at least in California.

Uber is appealing the ruling.

Right now, Uber has hardly any costs other than its 1,000+ employees in its San Francisco headquarters. Uber takes a percentage of every ride (20-30%). It doesn’t employ drivers, it merely connects supply (user requests on its app) with demand (independent contract drivers who are roaming around and have agreed to partner with Uber).

If this ruling sticks, Uber won’t just be a logistics company printing money, at least in California. The cost to run the business there would skyrocket. Uber would have to seriously consider downsizing the number of drivers it has as partners and provide benefits for them all.

Employees are expensive; companies have to pay social security and medicare taxes for each employee among other things, according to the IRS. They don’t have to do any of that for independent contractors. Also, drivers currently have to cover a lot of their expenses ? such as gas, car maintenance and insurance ? themselves, although Uber has begun to offer perks to offset some of these costs.?