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MarketScreener Homepage  >  Equities  >  Nyse  >  Uber Technologies, Inc.    UBER

UBER TECHNOLOGIES, INC.

(UBER)
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Uber Technologies : Employee Vs. Independent Contractor Developments

10/25/2020 | 04:23am EST

The classification, and more specifically the alleged misclassification, of independent contractors continues to dominate the headlines. The following is a summary of three significant and ongoing developments in this area under both federal and California law.

DOL Seeks to Clarify Independent Contractor Test Under Federal Law

The U.S. Department of Labor (DOL) issued a proposed rule on September 22, 2020, clarifying when a worker should be considered an employee under the Fair Labor Standards Act (FLSA), or an independent contractor. The proposed rule largely incorporates the long-standing "economic reality" test factors that were historically developed by the courts, but emphasizes the importance of certain factors over others.

As set forth in the proposed rule, the two core factors for consideration are:

<ul
  • The nature and degree of the worker's control over the work
  • The worker's opportunity for profit or loss based on initiative or investment
  • With respect to the first core factor, the DOL explained that the following examples may evidence substantial control by the contractor:

    <ul
  • Setting his or her own work schedule
  • Choosing assignments
  • Working with little or no supervision
  • Being able to work for others, including a potential employer's competitors
  • With respect to the core second factor, the DOL explained that an individual is a contractor if he or she has an opportunity to incur profit or loss on either:

    <ul
  • The exercise of personal initiative, including managerial skill or business acumen
  • The management of investments in or capital expenditure on, for example, helpers, equipment or materials
  • The DOL's proposed rule also outlines three additional, secondary factors for consideration:

    <ul
  • The amount of skill required for the work
  • The degree of permanence of the working relationship between the worker and the potential employer
  • Whether the work is part of an integrated unit of production
  • The DOL explained that, in the event the two core factors point toward the same classification, whether employee or contractor, there is little need to assess the secondary factors, as the secondary factors are unlikely to outweigh the combined weight of the two core factors.

    The DOL has given the public 30 days to comment on the proposed rule. If approved as written, the proposed rule should afford businesses and workers greater flexibility with respect to how they decide to structure their working relationship for purposes of federal law. However, the proposed rule will have no effect on state wage and hour laws (like AB 5, discussed below) which may espouse more stringent tests with respect to independent contractor classification.

    New Law Expands Exempt Occupations Under AB 5 Independent Contractor Test

    California Governor Gavin Newsom has signed into law AB 2257, which revises and expands the categories of exemptions under Assembly Bill 5. As discussed in our post here, AB 5 adopts the restrictive "ABC" test for independent contractor status imposed by the California Supreme Court in its April 2018Dynamex decision. However, certain occupations are excluded from the application of the ABC test, including persons providing professional services under specified circumstances.

    AB 2257 adds a number of new exemptions to AB 5. These exemptions include, among others, digital content aggregators in certain circumstances, licensed landscape architects, home inspectors, individual performance artists, and persons engaged in conducting international and cultural exchange visitor programs.

    Moreover, the new law revises the current exemption for certain freelance workers. Under existing law, freelance writers, editors and newspaper cartoonists were exempt from the application of the ABC test if they contracted for less than 35 content submissions in a year. However, AB 2257 deletes this 35-submission limit and expands exempt categories to include freelance writers, translators, editors, copy editors, illustrators and newspaper cartoonists who work under a written contract that specifies certain terms (including the rate of pay, intellectual property rights, and obligation to pay by a defined time), subject to certain restrictions.

    Importantly, and as noted in our prior article on AB 5, these excluded occupations are not exempt from contractor classification scrutiny altogether. Instead, they will be analyzed under the less rigid economic realities (or the Borello) test, which considers various factors in determining independent contractor status. In light of this new law, employers should carefully re-examine the classification of their workers.

    Uber and Lyft Continue to Battle Challenges to Worker Classification

    On August 10, 2020, the San Francisco Superior Court issued an injunction in People of the State of California v. Uber Technologies; Lyft ordering the two companies to reclassify their drivers from independent contractors to employees. The court reasoned that these companies could not credibly argue that the drivers are performing work outside of the usual course of the hiring entity's business, which is one of the required conditions under California's AB 5 independent contractor test. Although the two companies contend that they are "multi-sided platforms" rather than transportation companies, the court disagreed and found that the "drivers are central, not tangential, to Uber and Lyft's entire ride-hailing business."

    Pursuant to this order, the companies were initially given 10 days to comply and reclassify their drivers, but the California Court of Appeal extended this window indefinitely, staying the order
    pending resolution of Uber and Lyft's challenge to the order.

    In the meantime, Uber, Lyft and other prominent gig economy companies are continuing to push for the passing of Prop 22, appearing on November's ballot, which essentially exempts ride-sharing and food delivery companies from AB 5.

    The classification, and more specifically the alleged misclassification, of independent contractors continues to dominate the headlines. The following is a summary of three significant and ongoing developments in this area under both federal and California law.

    DOL Seeks to Clarify Independent Contractor Test Under Federal Law

    The U.S. Department of Labor (DOL) issued a proposed rule on September 22, 2020, clarifying when a worker should be considered an employee under the Fair Labor Standards Act (FLSA), or an independent contractor. The proposed rule largely incorporates the long-standing "economic reality" test factors that were historically developed by the courts, but emphasizes the importance of certain factors over others.

    As set forth in the proposed rule, the two core factors for consideration are:

    <ul
  • The nature and degree of the worker's control over the work
  • The worker's opportunity for profit or loss based on initiative or investment
  • With respect to the first core factor, the DOL explained that the following examples may evidence substantial control by the contractor:

    <ul
  • Setting his or her own work schedule
  • Choosing assignments
  • Working with little or no supervision
  • Being able to work for others, including a potential employer's competitors
  • With respect to the core second factor, the DOL explained that an individual is a contractor if he or she has an opportunity to incur profit or loss on either:

    <ul
  • The exercise of personal initiative, including managerial skill or business acumen
  • The management of investments in or capital expenditure on, for example, helpers, equipment or materials
  • The DOL's proposed rule also outlines three additional, secondary factors for consideration:

    <ul
  • The amount of skill required for the work
  • The degree of permanence of the working relationship between the worker and the potential employer
  • Whether the work is part of an integrated unit of production
  • The DOL explained that, in the event the two core factors point toward the same classification, whether employee or contractor, there is little need to assess the secondary factors, as the secondary factors are unlikely to outweigh the combined weight of the two core factors.

    The DOL has given the public 30 days to comment on the proposed rule. If approved as written, the proposed rule should afford businesses and workers greater flexibility with respect to how they decide to structure their working relationship for purposes of federal law. However, the proposed rule will have no effect on state wage and hour laws (like AB 5, discussed below) which may espouse more stringent tests with respect to independent contractor classification.

    New Law Expands Exempt Occupations Under AB 5 Independent Contractor Test

    California Governor Gavin Newsom has signed into law AB 2257, which revises and expands the categories of exemptions under Assembly Bill 5. As discussed in our post here, AB 5 adopts the restrictive "ABC" test for independent contractor status imposed by the California Supreme Court in its April 2018Dynamex decision. However, certain occupations are excluded from the application of the ABC test, including persons providing professional services under specified circumstances.

    AB 2257 adds a number of new exemptions to AB 5. These exemptions include, among others, digital content aggregators in certain circumstances, licensed landscape architects, home inspectors, individual performance artists, and persons engaged in conducting international and cultural exchange visitor programs.

    Moreover, the new law revises the current exemption for certain freelance workers. Under existing law, freelance writers, editors and newspaper cartoonists were exempt from the application of the ABC test if they contracted for less than 35 content submissions in a year. However, AB 2257 deletes this 35-submission limit and expands exempt categories to include freelance writers, translators, editors, copy editors, illustrators and newspaper cartoonists who work under a written contract that specifies certain terms (including the rate of pay, intellectual property rights, and obligation to pay by a defined time), subject to certain restrictions.

    Importantly, and as noted in our prior article on AB 5, these excluded occupations are not exempt from contractor classification scrutiny altogether. Instead, they will be analyzed under the less rigid economic realities (or the Borello) test, which considers various factors in determining independent contractor status. In light of this new law, employers should carefully re-examine the classification of their workers.

    Uber and Lyft Continue to Battle Challenges to Worker Classification

    On August 10, 2020, the San Francisco Superior Court issued an injunction in People of the State of California v. Uber Technologies; Lyft ordering the two companies to reclassify their drivers from independent contractors to employees. The court reasoned that these companies could not credibly argue that the drivers are performing work outside of the usual course of the hiring entity's business, which is one of the required conditions under California's AB 5 independent contractor test. Although the two companies contend that they are "multi-sided platforms" rather than transportation companies, the court disagreed and found that the "drivers are central, not tangential, to Uber and Lyft's entire ride-hailing business."

    Pursuant to this order, the companies were initially given 10 days to comply and reclassify their drivers, but the California Court of Appeal extended this window indefinitely, staying the order
    pending resolution of Uber and Lyft's challenge to the order.

    In the meantime, Uber, Lyft and other prominent gig economy companies are continuing to push for the passing of Prop 22, appearing on November's ballot, which essentially exempts ride-sharing and food delivery companies from AB 5.

    The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

    Fenwick & West LLP
    Fenwick & West LLP
    801 California Street
    Mountain View CA 94041
    California
    UNITED STATES
    Tel: 6509888500
    Fax: 6509385200
    E-mail: website@fenwick.com
    URL: www.fenwick.com

    © Mondaq Ltd, 2020 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source Business Briefing

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    Financials (USD)
    Sales 2020 12 557 M - -
    Net income 2020 -6 692 M - -
    Net Debt 2020 1 789 M - -
    P/E ratio 2020 -13,4x
    Yield 2020 -
    Capitalization 89 599 M 89 599 M -
    EV / Sales 2020 7,28x
    EV / Sales 2021 5,15x
    Nbr of Employees 21 600
    Free-Float 96,7%
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    Mean consensus OUTPERFORM
    Number of Analysts 44
    Average target price 49,26 $
    Last Close Price 50,80 $
    Spread / Highest target 28,0%
    Spread / Average Target -3,02%
    Spread / Lowest Target -55,7%
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    NameTitle
    Dara Khosrowshahi Chief Executive Officer & Director
    Ronald D. Sugar Chairman
    Nelson J. Chai Chief Financial Officer
    Sukumar Rathnam Chief Technology Officer
    Yasir bin Othman Al-Rumayyan Independent Director
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