The Uber Factor – Will you be ready?

by Debora Fajer-Smith
July 22nd, 2015

Uber Factor - Independent Contractor vs Employee

We all realize the internet has caused paradigm shifts in the market place – possibly in ways never imagined.

Who are the movers and shakers? The winners and losers? One big question can only be answered after the roll out of the “Uber revolution”. As protesting cabbies revolted in the streets of France, French prosecutors arrested French Uber executives, which some believe was done to placate the longtime respected taxi drivers industry. Other countries are handling the estimated 50 billion dollar “service app” company with crisis responses as well.

As the legal battles continue, this note suggests that once the issue of legal status of the parties is “redefined” with respect to all, that the “Uber Factor” may be seen as one of the most ingenious inventions of our changing global economy in enhancing financial interests of those on the top as well as the bottom.

Redefinition of legal roles to conform to these global shifts will allow all to benefit while interacting in a civil forum. The “service app” may be a prototype for other service areas such as cleaning services, handyman services, and other contractual industries.

As we trial lawyers commonly do, I attend conferences and am often reminded how antiquated our State of Maryland is – where contributory negligence will still bar a negligence case if the Plaintiff is one percent (1%) at fault. However, I am not only impressed, but proud that Maryland has tried to get ahead of the “Uber Factor”. Governor Hogan signed the bill the General Assembly presented to him this 2015 session regulating Uber activity.

Many issues still remain, but, for now, the new statute appears to have at least satisfied both Uber fans and traditional cab drivers. The Maryland legislature came together on this bill and was able to preempt all the municipalities and counties who were attempting to regulate the issue themselves. The Public Service Commission will now regulate Uber and its drivers.

The Governor, by signing Senate Bill 868, an Act titled Public Utilities – Transportation Network Services and For–Hire Transportation, provided, in part, who is responsible for insurance, to what extent, coverages, licensing, prerequisites such as background checks, and many other regulations.

Let’s recall another agency: The Maryland Workers’ Compensation Commission, which regulates one of the largest economic engines in our state, constantly determines who is an employer and upon whom the financial liability falls. These definitions are not similar to tax definitions, and are based on the statutory scheme and many years of case law. The Commissioners listen to the facts and apply the law on a case by case basis. The case can be appealed to the Circuit Court for a trial de novo (a new trial), and further to the appellate courts.

Interesting questions arise: Are Uber drivers employees or independent contractors?  How will the Uber factor be decided?

Two states have made headlines in rulings on Uber cases, Florida and California. Just like FedEx, which fought for years to keep drivers as independent contractors, it could take a while to define these roles. As one article has predicted, “Uber may be making itself more and more attractive as a target with a very deep pocket.”

The California Labor Commissioners ruled recently on the side of the driver and against the “service app” company, Uber. The driver was determined an employee and not an independent contractor. (See McBride & Levine, Reuters Technology, June 18, 2015). This, of course, forces Uber to appeal since the ramifications could be enormous. Along with social security, would Uber be liable for Workers’ Compensation insurance?

A Florida labor decision also came down on the side of the driver as an employee. Meanwhile small Florida jurisdictions, such as Broward County, are trying to grapple with determining rights between taxi cab drivers and Uber drivers.

A turn back to Maryland – could we really be ahead of the nation? Has the new statute allowed the basis for the creation of a new “entity”, not bound by our old concepts of worker vs. employer? Or independent contractor vs. employee? (Could Creating a New Class of Worker Solve the Sharing Economies Labor Problem? Tristan Zier, CEO of Zenn99, June 19, 2015).

Can we imagine a set of legal constructs where both Uber and the driver are winners? We will need to create a new category where all fish learn to swim in the same bowl, large and small, and each party takes on certain responsibilities. In a recent article, Uber, Lyft, secure future in Maryland with passage of ride-share law, Baltimore Sun April 14, 2015, Kevin Rector states;

“This bill places ride-share companies under the oversight of the Maryland Public Service Commissioners, which already regulates taxi companies in much of the State. But it does so under a new regulatory framework for so called ‘transportation network services’ that the companies find less onerous than the structure applied to taxis.”

In Maryland, there is a body of case law that has defined the employer/employee relationship as to workers’ compensation; however, it largely depends on the factor of control. See Injured Workers’ Insurance Fund v. Orient Express Delivery Serv. 190 Md. App 438, 988 A.2d 1120 (2010).  It considers, for example:

1)  Does the Employer have “control” over the employee’s method, manner, and duties?

2)  Whether the parties contemplated an employer-employee relationship?

3)  The structure of the relationship including factors such as 1099, contracts and insurance?

However, with this new third “service app” category – could parties actually exempt themselves from the Commission’s jurisdiction? At present, if an employer has only one employee, he or she must have workers’ compensation insurance, but can officially exempt him or herself as owner. Could the statute or regulations go one step further and state that anyone who joins a “network services app” must exempt themselves from workers’ compensation coverage under the statute?

In Edith A. Anderson Nursing Homes Inc. v. Walker, 232 Md. 442, 194 A.2d 85 (1963), the following functions were listed in consideration of an employer-employee relationship: (a) agreement; (b) wages; (c) power of dismissal; (d) power of control; (e) whether work is regular business of the employer; (f) whether parties believed they created such relation; and (g) whether work is done under direction or without supervision.

For example, an attorney for Uber could argue that in Maryland the legislature has spoken and no employer-employee relationship is recognized. They are basically partially regulated but they remain a “hook up” with absolutely no employer power over whether a driver decides to work.

An advocate for the driver may have to think twice. Does his client really want the Uber industry to be his employer? Perhaps not. However, if he or she wanted to be an employee, the attorney could argue that there are many controlling factors:

(1) Uber sets up rules for obtaining clients
(2) Uber requires a portion of every fee
(3) Uber sets the levels of employee statuses, i.e. X, SUV, Black (Limo or Sedan) 
(4) Uber can terminate drivers
(5) Uber requires the drivers to keep up a certain satisfactory rating by the passengers

In this writer’s imagination, the Uber phenomenon is one we will see replicated in many other areas as a “service app.” Furthermore, after recently interviewing a driver I had hired for functions in Maryland from an established car service, I got the impression that workers’ compensation, pardon the pun, “took a back seat” to anyone’s excitement with the “service app”.

This driver told me, “here’s my card, just call me when you’re ready- I’ll be doing Uber while I wait for you- do you mind?”

As an advocate for the working class for the past 30 years, I was impressed with his work ethic and his enthusiasm in earning perhaps another 120 dollars in his pocket over the next two hours rather than taking a nap!

I’m not the only one who believes a new business prototype has arrived.

The chair of the Workers’ Compensation and Insurance Group at Joseph, Greenwald and Laake, Debora Fajer-Smith has nearly 30 years of experience in representing people injured in auto or workplace accidents, and those suffering occupational injury or death. Debora is a passionate advocate for her clients’ rights and takes pride in being able to put severely injured people back on the path to independence, whether through obtaining a lump sum, medical treatment or lining up vocational training for a new job.

Contact Debora Fajer-Smith

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Disclaimer

The JGL Law Blog is made available by the Firm and/or the law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law. The JGL Law Blog is not designed to and does not provide specific legal advice. Use of, or comments on, this Blog does not create an Attorney Client Relationship with the Firm or any of the authors of the Blog Posts.

This blog is for general informational purposes only. Joseph, Greenwald & Laake, PA is a law firm and some of the information on the blog relates to legal topics. Joseph, Greenwald & Laake, PA does not offer or dispense legal advice through this blog or by e-mails directed to or from this site. By using the blog, the reader agrees that the information on this blog does not constitute legal or other professional advice and no attorney-client or other relationship is created between the reader and Joseph, Greenwald & Laake, PA or its attorneys. The blog is not a substitute for obtaining legal advice from a qualified attorney licensed in your state. The information on the blog may be changed without notice and is not guaranteed to be complete, correct or up-to-date. While the blog is revised on a regular basis, it may not reflect the most current legal developments. The opinions expressed at or through the blog are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney. The JGL Law Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

To ensure compliance with requirements imposed by the U.S. Internal Revenue Service in Circular 230, we inform you that any tax advice contained on this site (including any links provided) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the U.S. Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.

˅