TORONTO -- A ruling from a California labour board that Uber drivers are employees of the company and not self-employed contractors sets a precedent that could spell trouble for the ride-sharing service's Canadian operations.
The California Labor Commission said Wednesday in a non-binding decision that the San Francisco-based Uber Technologies Inc. was involved in "every aspect of the operation" of its ride-hailing service, opening the door for the company to eventually begin paying its drivers employee benefits such as vacation pay.
Harry Ghadban, a national representative for Unifor and former taxi driver, says the California decision, though it carries no weight in Canada, shows a major flaw in Uber's business model.
Uber has vociferously argued that it merely acts as a facilitator for its drivers, who pick up fares through the company's smartphone app and work on their own schedule.
On its website, the company flatly declares that it is not a transportation provider.
Ghadban argues that Uber is simply a taxi company with more sophisticated software.
"The decision says they're a transportation company and therefore should be abiding by the rules and regulations set out for the taxi industry," he added.
The company's insistence that its drivers are independent contractors is a ploy to avoid having to pay the costs associated with running a taxi service, including the extended insurance required by most jurisdictions and other employment benefits, he said.
In a statement, Uber downplayed the impact of the ruling, pointing out that it is non-binding and only 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,"' the company said on its website.
Five other states have come to a similar conclusion as the 2012 ruling, the company added.
In Canada, Uber has courted controversy by skirting the regulations on taxi services, claiming that it has less responsibility for insurance and benefits than a traditional employer.
Uber has spread across Canada by focusing on seamless transactions through its mobile application and by using its low-cost model to undercut taxi prices.
The company's service has divided opinion around the world.
The company operates in 57 countries and has faced protests, lawsuits, and hostile lawmakers in many of them including India, China, and the United Kingdom. Some places have banned the company outright, including Germany, France and Spain.
Toronto mayor John Tory has said municipalities and cab companies should work with the company, and some taxi services have released their own apps that mimic Uber's GPS-enabled maps and credit-card payment system.
At the same time, other civic leaders and governments have cracked down on the company and its drivers with fines and new by-laws. Despite Tory's comments and the company's recent application for a taxi brokerage licence, lawyers from the City of Toronto are still pursuing an injunction to shut down Uber's services.
While the company has a presence in Edmonton, Toronto, Ottawa, Montreal, Quebec City and Halifax, it was forced to shut down after brief experiments in Vancouver and Calgary.
Ottawa South MPP John Fraser introduced a private member's bill in the Ontario legislature in December to increase the punishment for drivers found to violate provincial taxi laws, including raising the fine for illegally transporting riders from $500 to $30,000 per offence.
Ross Wells, an employment lawyer at Gowling Lafleur Henderson LLP, said that the relationship between Uber and its drivers is dramatically different from traditional employment relationships, but that new legislation is unnecessary.
"We have a detailed and developed series of tests and factors to look at when considering whether one is an employee or a contractor," he said. "I don't think that the Uber arrangement is unable to be examined under those tests."
