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Uber settles with drivers challenging contractor classification

Uber announced last week that the majority of the 60,000 arbitration demands filed by drivers have now settled. Drivers across the U.S. disputed their classification as independent contractors and demanded that the issue be resolved at arbitration. The settlement announcement came as part of Uber's regulatory filings for its upcoming IPO.

The latest in a series of disputes with drivers

Uber drivers, as well as drivers for other rideshare companies, have been challenging their employment classification for years now. As employees, drivers claim they would have rights to things like sick leave, overtime, a minimum wage and reimbursement for job expenses.

However, Uber has consistently argued that its drivers are not employees. The company contends that drivers control their hours and can also drive for other ridesharing apps. CNN reported that the latest lawsuit will likely cost the company between $145 million and $170 million, on top of the $20 million paid to drivers in California and Massachusetts earlier this year.

Can gig workers be considered employees?

With the rise in gig-based work, the debate over contractor status is likely to continue across various industries. Earlier this spring, the Texas Workforce Commission adopted a new rule relating to contractors in the gig economy - or "marketplace contractors," as the rule calls them.

The rule outlines nine conditions1 under which someone working for a marketplace platform, like Uber, would be considered a contractor rather than an employee for the purpose of unemployment laws:

  • All or substantially all payment made to the contractor2 is made on a per-job or transaction basis;
  • The marketplace platform3 does not unilaterally prescribe specific hours during which the contractor must be available to accept service requests from the public submitted through the platform's digital network4;
  • The contractor is not prohibited from using a digital network provided by another company;
  • The platform does not restrict the contractor from engaging in any other occupation or business;
  • The contractor controls where and when they work, and when they access the marketplace platform's digital network;
  • The contractor bears all or substantially all of their own expenses;
  • The contractor is responsible for providing the necessary tools, materials, and equipment to perform the service;
  • The platform does not control the details or methods for the service performed by the marketplace contractor by requiring them to follow specified instructions; and
  • The marketplace platform does not require the contractor to attend mandatory meetings or training.

Under these conditions, many workers in the gig economy might be classified as independent contractors. The adoption of this new rule is significant because, unlike many similar rules in other states, it accounts for the realities of companies providing services through digital platforms. Going forward, app-based companies and gig workers alike will continue to influence the way these rules develop - and classification of workers will continue to be a common issue in employment litigation.


1 40 Tex. Admin. Code §815.134(b)(2) (2019), available through the Texas Register

2 The term "marketplace contractor" or "contractor" means any individual, corporation, partnership, sole proprietorship, or other entity that enters into an agreement with a marketplace platform to use the platform's digital network to provide services to the public (including third-party individuals or entities) seeking the type of service or services offered by the marketplace contractor. 40 Tex. Admin. Code §815.134(b)(1)(C) (2019).

3 The term "marketplace platform" means a corporation, partnership, sole proprietorship, or other entity operating in this state that:

(i) uses a digital network to connect marketplace contractors to the public (including third-party individuals and entities) seeking the type of service or services offered by the marketplace contractors

(ii) accepts service requests from the public (including third-party individuals and entities) only through its digital network, and does not accept service requests by telephone, by facsimile, or in person at physical retail locations; and

(iii) does not perform the services offered by the marketplace contractor at or from a physical business location that is operated by the platform in the state.

40 Tex. Admin. Code §815.134(b)(1)(B) (2019).

4 The term "digital network" means an online-enabled application or website offered by a marketplace platform for the public (including third-party individuals and entities) to use to find and contact a marketplace contractor to perform one or more needed services. 40 Tex. Admin. Code §815.134(b)(1)(A) (2019).

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