Two former drivers for Uber are eligible for unemployment payments, New York state regulators have ruled, finding that they should be treated as employees rather than independent contractors, as the company has maintained.
Unlike contractors, employees are entitled to a variety of rights and protections, including a minimum wage and workers’ compensation insurance, and are typically more costly for companies to rely on.
The decision could make it more difficult for Uber, its rival Lyft and other new businesses operating in what is known as the gig economy by raising their costs and challenging their business model.
The rulings by the New York State Department of Labor were sent to the two Uber drivers (one also worked for Lyft) in August and September but have not previously been reported. They apply only to their unemployment insurance claims and do not directly affect other drivers or extend to other protections normally accorded employees.
But worker advocates say they plan to pressure the state to extend the logic of the unemployment rulings to other areas.
“I think this is a game-changer,” said Bhairavi Desai, executive director of the New York Taxi Workers Alliance, which filed a federal lawsuit with the two drivers in July to force the Labor Department to make a determination in their cases. “Uber has depended on the political structure turning a blind eye. What these decisions do is force a microscopic review” of drivers’ employment status by elected officials and government agencies.
It is not clear how far the advocates will be able to push the ruling. Tiffany Portzer, a spokeswoman for the New York Labor Department, said: “Unemployment determinations are made on a case-by-case basis and, depending on the facts, decisions have been made supporting both drivers as employees and drivers as independent contractors.”
State regulators recently deemed a third driver who is a member of the New York Taxi Workers Alliance to be a contractor after he filed an unemployment claim. The labor group said it was because of his confusion in filling out the necessary paperwork. It is asking for a hearing and reconsideration of his case to reverse the decision.
Uber said that drivers were contractors who “would lose the personal flexibility they value most” if they were classified as employees.
“While the Department of Labor has ruled that several drivers are independent contractors, we have appealed the other determinations,” the company said in a statement.
California has deemed at least two Uber drivers eligible for unemployment benefits, but the determinations have not led Uber to recast its relationship with drivers in the state.
The New York cases could prove problematic for Gov. Andrew M. Cuomo, who in 2015 aligned himself with Uber in helping to beat back a temporary cap on the number of licenses New York City would issue for cars affiliated with ride-hailing companies.
In February, when one of the two Uber drivers recently deemed eligible for unemployment benefits checked on the status of his claim, a state Labor Services representative told him by email that “All Uber claims we have are under executive review,” hinting at possible intervention by the governor’s office.
Richard Azzopardi, a spokesman for Cuomo, denied any intervention, saying that the senior ranks of the Labor Department had reviewed the Uber claims. Azzopardi declined to comment on the broader issue of the employment status of drivers.
New York state has a Joint Enforcement Task Force empowered to examine issues related to the misclassification of workers, which reports annually to the governor, and Cuomo could be called upon to wade into the debate.
The New York Taxi Workers Alliance argued that Uber’s control over drivers participating in its low-cost service, Uber X — the major question in resolving employment status — is similar to the control that many black-car dispatching services exert over their drivers, who in many cases have previously been ruled eligible for jobless benefits in New York.
Some of the ride-sharing cases probably will end up in New York state’s appellate courts, said Gary D. Friedman, a management-side employment lawyer at Weil, Gotshal in New York. Friedman said that if the courts, in clarifying the relevant portions of New York common law, find that many Uber drivers are employees for the purposes of receiving unemployment insurance, this could affect other areas, like application of minimum wage laws.
The New York unemployment case is not the only recent decision on whether online on-demand workers like Uber drivers are employees or contractors. Last Thursday, the National Labor Relations Board office in Chicago formally issued a complaint, which a board representative said was the first of its kind, against Postmates, an on-demand delivery platform, over allegations that Postmates impeded workers’ ability to exercise their labor rights.
In issuing the complaint, which The New York Times obtained through a Freedom of Information Act request, the board’s lawyers had to first conclude that Postmates couriers are employees, since the agency’s mandate does not extend to independent contractors.
The NLRB is investigating several charges by individuals against Uber and Lyft.
The two former Uber drivers in New York, Levon Aleksanian and Jakir Hossain, waited for months after they filed unemployment benefit claims for a determination about their eligibility, a process that normally takes a few weeks.
They filed a federal lawsuit against the state Labor Department in late July, and during the next two months each finally received what is known as a Monetary Benefit Determination stating that they were employees of Uber — a necessary but not sufficient condition for receiving benefits.
The department subsequently granted benefits to Hossain, who has received them retroactively. But Aleksanian, who said he ran up thousands of dollars in debt during months of unemployment, has still been denied benefits because of the circumstances of his separation from Uber. He is appealing the decision.
“It was a very scary moment,” Aleksanian said of his initial separation. “Until recently, I didn’t have any employment. I was applying continuously every day, but I couldn’t find anything.”