A recent decision from the California Labor Commissioner’s Office found that a former Uber driver was an employee of the company, not an independent contractor as the firm has labeled its motorists.  The implications for Uber, as well as other companies with similar business models, could be far-reaching.

In Berwick v. Uber Technologies Inc., plaintiff Barbara Berwick—who ran for local office in San Francisco in 2010 and is a self-described “community activist”—drove a car that picked up and dropped off customers through Uber from July to September 2014.  She contended before the Labor Commission that her work for the company qualified her as an employee instead of an independent contractor, and therefore Uber owed her reimbursement for mileage and toll expenses that she accrued while driving customers.  The Labor Commission awarded Berwick $4,152, an inconsequential amount for the $40 billion ride-hailing startup company; however, Uber is appealing the non-binding ruling.  If left unchallenged, or if other states follow suit, the ruling could significantly increase costs for Uber, which could potentially be forced to pay drivers Social Security, workers compensation, and other benefits.  According to a statement released by Uber, officials in five other states have found that its drivers are independent contractors.  Moreover, in 2012, the same California Commission found that another Uber driver was an independent contractor, citing evidence such as the ability of the driver to determine his own hours.

Since its founding in 2009, Uber has kept its drivers at arms’ length by claiming the company merely provides the technology to match chauffeurs with riders.  Nevertheless, the California Labor Commission found that Uber maintains significant control over its drivers, making it more of an employer than the “neutral technological platform” it claims to be.  The Commission further found that Uber “is involved in every aspect of the operation,” including the fares drivers charge, the model of cars they drive and, to some extent, how often they work.  Drivers also cannot negotiate how they split fares with Uber, the Commission said.

This decision could have the effect of inspiring workers to sue other businesses like competitor car-sharing service Lyft, food delivery services Caviar and Postmates, or mobile app home cleaning service Homejoy, which similarly define their workers as “independent contractors” rather than employees.  However, a victory could hinder the inexpensive labor model of the business sector and potentially create new costs for consumers who have become accustomed to convenient, on-demand service.