Thursday, June 18, 2015
A California Labor Commission ruling that an Uber driver is a company employee, not an independent contractor may dampen fears that the on-demand economy spells the end for workers compensation, liability and health insurance. At least for now.
As reported by numerous news outlets, here and here, the decision out of California – though it applies to a single driver – could significantly increase costs for the ride-sharing business if it is copied by other states and in other cases.
It could also have potential implications for other segments of the economy important to property/casualty insurers.
As the New York Times reports:
The classification of freelancers is in dispute across a number of industries, including at other transportation companies. And the debate is set to escalate as the number of online companies and apps like Uber and others rises.”
The ruling, which commentators say could hurt Uber’s $40 billion-plus valuation, orders Uber to pay Barbara Berwick, $4,152 in expenses for the time she worked as an Uber driver last year.
Here are a couple of key excerpts from the California Labor Commission decision:
Plaintiffs’ work was integral to Defendants’ business. Defendants are in business to provide transportation services to passengers. Plaintiff did the actual transporting of those passengers. Without drivers such as Plaintiff, Defendants’ business would not exist.”
Defendants hold themselves as nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation. The reality, however, is that Defendants are involved in every aspect of the operation.”
In response to the ruling (which it has appealed) Uber stated:
The California Labor Commission’s ruling is non-binding and applies to a single driver. Indeed it is contrary to a previous ruling by the same commission, which concluded in 2012 that the driver ‘performed services as an independent contractor, and not as a bona fide employee.’ Five other states have also come to the same conclusion.”
Potential insurance issues arising out of the on-demand or sharing economy are a recurring topic of conversation these days.
In a recent presentation I.I.I. president Dr. Robert Hartwig noted that traditional insurance will often not cover a worker engaged in offering labor or resources through these on-demand platforms.
For example, private passenger auto insurance generally won’t cover you while driving for Uber and a homeowners insurance policy won’t cover a homeowner for anything other than occasional rents of their property.
Also, Dr. Hartwig said: “Unless self-procured, on-demand workers (independent contractors) will generally have no workers comp recourse if injured on the job.”