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Court Says Uber Drivers Are Independent Contractors – New Michigan Law Agrees

In what appears to be the first appellate court directly ruling on this issue, a Florida state appeals court ruled last week that Uber drivers are independent contractors and not employees.

The case, McGillis v. Department of Economic Opportunity, et al., arose out of a dispute over whether former Uber driver, Darren McGillis, was eligible for unemployment benefits after Uber revoked his access to the technology platform. Although a state agency initially found that he was an employee, Uber contested that determination. After a series of agency hearings and appeals, Florida’s Department of Economic Opportunity eventually ruled that McGillis was an independent contractor, which McGillis appealed.

The court aptly noted that the issue of employment status in the gig-economy is inherently difficult stating, “In this case, we must decide whether a multi-faceted product of new technology should be fixed into either the old square hole or the old round hole of existing legal categories, when neither is a perfect fit.”

The court’s examination of the relationship between Uber and its drivers, while under Florida law, provides insight into how other courts may rule on the issue. Florida courts look at several factors to determine whether a person is or is not an employee for purposes of collecting unemployment. Like many jurisdictions, the common-law control analysis is often determinative. This analysis looks to how much the employer directs the manner and means of the work the individual performs. Generally, the more control exerted by an employer over the details of the work, the more likely that the worker is an employee. Conversely, if the control exercised by the employer is focused primarily on the results of the work (and not how the work is performed) then independent contractor status is more likely.

Decisive to the court’s analysis was that Uber drivers are able to work at their own discretion and can even perform work for direct competitors (like Lyft) when not driving passengers for Uber. Also important to the court was that Uber does not directly supervise drivers and relies instead on passenger evaluations. As stated by the court, “Due in large part to the transformative nature of the internet and smartphones, Uber drivers like McGillis decide whether, when, where, with whom, and how to provide rides using Uber’s computer programs. This level of free agency is incompatible with the control to which a traditional employee is subject.”

The court also examined the contract between Uber and the driver, which “unequivocally disclaims an employer-employee relationship.” Importantly, the contract explicitly informed the driver that by virtue of this independent contractor status, the driver would not be entitled to unemployment benefits following termination of the relationship. Although the decision by the court has limited precedential value outside of Florida, it may provide a roadmap for other courts when determining employment status of on-demand or gig-economy workers.

On March 21, 2017, the “Limousine, Taxicab, and Transportation Network Company Act” becomes effective, taking this issue out of Michigan courts’ hands. The Act explicitly provides that drivers for transportation network companies (such as Uber and Lyft) are independent contractors provided certain conditions are met:

      • the transportation network company does not prescribe the hours that the driver must be logged into its program;
      • the transportation network company does not restrict the drivers’ ability to drive for other companies;
      • the transportation network company does not limit or assign territories in which the driver can work;
      • the transportation network company does not prohibit a driver from engaging in any other occupation or business; and,
      • the transportation network company and the driver agree in writing that the driver is an independent contractor.

Importantly, the Act is limited only to transportation network companies like Uber and Lyft and does not apply to other gig-economy companies in Michigan.

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