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U.S. court rules Uber drivers are freelance contractors, not employees

It means drivers won't be entitled to minimum wage or healthcare insurance.

FILE PICTURE: The Uber ride sharing app is seen on an Android portable device on February 5, 2018. (Photo by Jaap Arriens/NurPhoto via Getty Images)
FILE PICTURE: The Uber ride sharing app is seen on an Android portable device on February 5, 2018. (Photo by Jaap Arriens/NurPhoto via Getty Images)

A U.S. district judge has ruled that limousine drivers for Uber are contractors, not employees. This is the first ruling of its kind in the U.S., and a major legal victory for the ride-sharing giant.

Judge Michael Baylson of Philadelphia ruled on Wednesday that Uber did not exert enough control over the drivers of UberBLACK, its limousine service, to consider them employees, As Reuters Daniel Weissner reported, Baylson based his decision on the fact that these drivers were free to “nap, run personal errands, or smoke cigarettes between rides.”

This means these drivers won’t be considered to be employees under the Fair Labor Standards Act, which in turn means that they won’t be entitled to minimum wage, healthcare or overtime. Uber said that it was pleased with the outcome, although Jeremy Abay, a lawyer for the plantiffs, said they’d appeal the decision.

Uber has long argued that, because its drivers are independent contractors and not employees, it can get away with paying them scraps. In March 2016, an analysis by experts at MIT’s Center for Energy and Environmental Policy Research (CEEPR) made a median profit of $8.55 an hour — before taxes.

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That means that more than half of all Uber drivers make less than their state’s minimum wage, and one in ten actually lose money on the job. Toss in the fact that Uber has previously admitted to making false promises to its drivers as well as underpaying them in New York and a grim pattern starts to emerge.

To make matters worse, many Uber drivers take out loans to buy cars that meet the company’s requirements. In the case of UberBLACK, this would involve buying a more high-end vehicle, like a Jaguar XF (starting at around $50,000) Mercedes S-Class (starting at around $90,000).

It is a fairly risky practice for anyone earning subsistence-level wages and lacking employee rights to take out loans of this magnitude. But Uber compounds this risk by funneling their drivers into the company’s system of predatory leasing. Similar to subprime loan schemes, this arrangement puts drivers with bad credit into cars they can’t afford with loans that have extremely high interest rates.

Some cities have taken steps to support drivers and undercut Uber’s business model. Last November, a British employment tribunal in London ruled that drivers needed to be classified as workers, with the right to the minimum wage, sick leave, and paid time off. According to a July report by Labor MP Frank Field, Uber’s business structure meant that British drivers were taking home as little as $2.64 an hour, not even a third of what they were entitled to under the country’s national living wage.

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“If you want to make a reasonable return for your working week you just simply have to work 80, 90,100 hours a week,” Uber driver James Farrar, one of the drivers to bring the case before the employment tribunal, told the Guardian. “And that’s just inhumane and unsafe.”

Last February, former Uber CEO Travis Kalanick was confronted in an Uber by one of his company’s drivers, who asked why he was dropping the prices for its service. “You know what, some people don’t like to take responsibility for their own shit,” Kalanick responded. “They blame everything in their life on somebody else. Good luck!”