Uber: Ruling opens self-employed debate
This week, Uber Technologies Inc., the ride-sharing firm that matches drivers with passengers through its smartphone app, filed an appeal against a California Labor Commission ruling that said an Uber driver should be classified as an employee rather than an independent contractor.
Barbara Ann Berwick, who worked as an Uber driver for two months in 2014, made a claim for unpaid wages and expenses totalling more than US$4,000. The ruling could have huge implications for the valuation of the firm and even its future if other jurisdictions come to similar conclusions. That's because Uber could be on the hook for costly employee benefits, which in Canada may include vacation pay and the employer portion of CPP and EI.
While the CRA hasn't commented on the Uber case, the issue of employee vs. independent contractor is one of the most hotly contested personal-tax issues, so much so that it has published a guide, RC4110, entitled, "Employee or Self-employed?"
According to the guide, the key question asked is whether the individual is "engaged to perform services as a person in business on his or her own ... or as an employee" using a two-step approach.
Step 1 is to ask the worker and the payer what their intent was when they entered into the working arrangement. While workers and payers can set up their affairs as they see fit, they need to ensure that the status they have chosen is reflected in the actual terms and conditions of the working relationship.
To that end, Step 2 looks at elements of the relationship. These are: the level of control the payer has over the worker's activities, whether the worker provides the tools and equipment, whether the worker can subcontract the work or hire assistants, the degree of financial risk the worker takes, the degree of responsibility for investment and management the worker holds, the worker's opportunity for profit and any other factors, such as contracts.
According to the labour commission's ruling, Uber holds itself out as "nothing more than a neutral technological platform, designed to enable drivers and passengers to transact the business of transportation. The reality, however, is that Defendants (Uber) are involved in every aspect of the operation."
A statement on Uber's website said the ruling is "non-binding and applies to a single driver. Indeed it is contrary to a previous ruling by the same commission, which concluded in 2012 that the driver 'performed services as an independent contractor, and not as a bona fide employee. Six other states have also come to the same conclusion."
Uber has appealed the California labour commission ruling.