UBER Uber Technologies Inc

By Sam Schechner and Preetika Rana 

France's highest appeals court ruled that one of Uber Technologies Inc.'s former drivers should be recognized as an employee rather than as an independent contractor, putting France at the vanguard of other efforts around the world to give so-called gig-economy workers broader employment rights.

The decision -- which can't be appealed -- appears to be the first from a top court anywhere in the world that contradicts Uber's contention that its drivers are independent contractors. Uber is facing similar litigation in the U.S. and the U.K. It recently won a case in Brazil, which ruled that its drivers aren't employees.

The cases are part of a global battle over how to regulate employment in the gig economy, where apps distribute individual tasks to a pool of people that the app makers usually regard as independent contractors.

In France, the Cour de Cassation upheld an appeals-court ruling that found that the former Uber driver's "status as an independent contractor was fictitious" because he had a "relationship of subordination" to the company. That is because Uber dictates the terms of its drivers' work, such as by setting their rates and determining their routes, and can sanction them when they violate Uber's rules, the court said.

The court brushed aside Uber's arguments, including that its drivers have no obligation to work and can connect to the app when they wish, saying that such a requirement is unnecessary to establish employment status.

"This decision relates to the case of one specific driver, who hasn't used the Uber app since 2017," Uber said after the decision. "The ruling does not reflect the reasons why drivers choose to use Uber: the independence and freedom to work if, when and where they want."

Wednesday's decision doesn't directly affect the employment status of other drivers in France. But the court's opinion, which says that Uber drivers are in a "relationship of permanent legal subordination" to Uber, could allow any Uber driver to demand reclassification by a French employment tribunal.

"This sends a strong signal to Uber and other platforms," said Fabien Masson, the lawyer for the former Uber driver, who will now seek severance and back pay from the company before an employment tribunal. "All Uber drivers will be able to use this decision."

An Uber spokeswoman said that if a current driver were to petition to change their employment status, Uber "would have no choice but to terminate the agreement with the driver as our app isn't built for this model (as of now)." She added that its existing cases in France involve only former drivers asking for severance payments.

The issue remains under litigation in other parts of the world. In the U.K., an appeals court ruled in 2018 that Uber drivers have a type of employment status that entitles them to some rights such as paid vacations and a minimum wage. Uber's appeal in that case will be heard in the U.K.'s Supreme Court in July.

In that case as well, a key issue is subordination, or deciding whether drivers are in a position of inferiority to Uber rather than on an equal footing, which would be the case in a commercial relationship, said Jason Galbraith-Marten, an employment lawyer with London law firm Cloisters who represents drivers in the worker-status case against Uber in the U.K.

Uber faces mounting regulatory challenges in the U.S. California, which accounts for 9% of Uber's bookings, last year passed a law aimed at reclassifying the company's drivers as employees, eligible for benefits such as health insurance, sick days and minimum wage. Uber has maintained it doesn't need to reclassify drivers.

The law, which went into effect on Jan. 1, establishes a test that employers must pass to classify their workers as independent contractors. Employers who don't meet the test must treat their workers as employees. Uber has said that it meets that test and so doesn't need to reclassify drivers as employees. At the same time, it has made a series of changes to give drivers in California more autonomy to bolster its argument. Drivers in the state can now see where riders are going, in effect choosing the trips they want to take. Some can even set fares.

Uber has also joined with other U.S. companies whose operations rely on so-called gig workers. Together, they collectively raised over $110 million for a ballot initiative this year, asking that state voters exempt them from the statute. If people vote in the companies' favor, it would preclude further legal challenges and invalidate any current litigation based on the law.

The ballot measure promises several other protections to gig workers that currently don't exist, such as giving drivers 30 cents for each mile driven to account for gas and other vehicle costs, health-care subsidies for drivers who work 15 hours or more a week and occupational-accident insurance coverage while on the job.

The stakes are potentially high for Uber. "The classification of Drivers is currently being challenged in courts, by legislators and by government agencies in the United States and abroad," Uber noted in its 2019 annual report published on Monday. Any reclassification would "incur significant additional expenses," the company said, adding that it "would require us to fundamentally change our business model, and consequently have an adverse effect on our business and financial condition."

Uber separately said that more than 100,000 drivers in the U.S. "have filed (or expressed an intention to file) arbitration demands against us that assert similar classification claims." The company said it expects to pay $170 million to settle these cases, of which $149 million had been paid as of Dec. 31, 2019.

Such settlements "force these disputes into the shadows," said Travis Lenkner, managing partner at Chicago-based Keller Lenkner LLC, which this week won a successful appeal of a lower U.S. court ruling in a Pennsylvania case. The lower court ruled that Uber drivers couldn't be classified as employees.

"Once the disputes make it to court, Uber's business model is being unanimously rejected. It's true in France, it's true in the U.K. and now it's true in the U.S.," Mr. Lenkner said.

Parmy Olson contributed to this article.

Write to Sam Schechner at sam.schechner@wsj.com and Preetika Rana at preetika.rana@wsj.com

(END) Dow Jones Newswires

March 04, 2020 15:40 ET (20:40 GMT)

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