uberindia

In a ruling a couple of days ago, the California Labor Commission said that drivers working for technology platforms like Uber are essentially employees of the company, and not independent contractors. It said that while platforms like Uber may “hold themselves out as nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation. The reality, however, is that they’re involved in every aspect of the operation. They vet prospective drivers…control the tools the drivers use…monitor the drivers approval rating and and terminate their access to the application if the rating falls below a specific level.” Also, Uber has the sole discretion in deciding what passengers will be charged for the service provided.

An Uber spokesperson told MediaNama that:

“Reuters’ original headline was not accurate. The California Labor Commission’s 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.’  Five other states (in the US) have also come to the same conclusion.  It’s important to remember that the number one reason drivers choose to use Uber is because they have complete flexibility and control.  The majority of them can and do choose to earn their living from multiple sources, including other ride sharing companies. We have appealed this ruling.”

It needs to be pointed out here that this ruling is restricted to only the case in question (Barbara Ann Brewick vs. Uber Technologies), and will not apply to other cases. However, it does raise an interesting question about Intermediary liability and online aggregators/marketplaces’ responsibility towards merchants/vendors/contractors on the platform and the consumers. Also, this isn’t the first instance of drivers working for Uber being classified as employees: a similar ruling was made last month in Florida as well.  

Interestingly, in an August 2012 ruling (of which Uber had provided MediaNama a copy), the California Labor Commission had a completely different view on Uber’s business model:

“Defendant’s (Uber) business was engaged in technology and not the transportation industry. … Defendant did not supervise or direct his work and paid him only when Plaintiff involved Defendant. Based on the testimonies and evidence presented, Plaintiff performed services as an independent contractor of Defendant, and not as a bona fide employee.”

Implications

In India, online marketplaces like Uber (Intermediary) are protected by Section 79 of the IT Act (Amendment), 2008. It proffers safe harbor to Intermediaries: as long as they act on complaints and do not knowingly allow the usage of their platform to break the law. If, however, Uber’s driver partners are considered its employees, it would cease to be a mere Intermediary. It’s worth noting that in April this year, Uber had asked a US district court to dismiss the lawsuit filed by the Delhi rape victim for negligence & fraud in January, stating that it should not be held legally responsible for its driver’s act.

It’s not just online taxi booking services like Uber, Ola and TaxiForSure, that would be affected by this. E-commerce marketplaces like Flipkart, Amazon (in India), Snapdeal, and ShopClues among others also operate as Intermediaries, and often shy away from taking responsibility for the actions of the vendors on its platform.

Fake or counterfeit products being sold by merchants on these platforms is one such issue. Shopclues had been slapped with a legal notice from audio devices manufacturer Harman International for selling fake and counterfeit products from various vendors on its website, in January this year. In the same month, L’Oreal, Tommy Hilfiger, Skullcandy and RayBan had also initiated legal actions against Shopclues in the Delhi High Court in connection with sale of counterfeit goods and the HC had granted interim injunctions against the marketplace. Earlier this year, saree distributor Shree Meena Creations had also filed a lawsuit against Flipkart, Amazon and eBay, along with about two dozen sellers on these marketplaces for allegedly selling replicas of its copyrighted sarees. Then there was the case of alleged fake Xiaomi Power Bank being sold on Amazon India, being “fulfilled by Amazon”, last year, while verified buyers had written reviews indicating that the product being sold was fake. More on this here.

As we have pointed out earlier, on several occasions, there is a need for better understanding of the responsibility, accountability and liability of platforms, marketplaces and aggregators. Maybe it’s time that India got a consumer protection regulator, which can define processes and accountability. It’s strange that despite so many complaints on forums and comment sections, the Indian government had only received nine complaints regarding fraud committed by e-commerce companies, last year. There’s no doubt that online aggregators and marketplaces are good for consumers and competition. But then who is accountable, when things get screwed up? Should there be liability of these platforms?

Just as the California Labor Commission observed that Uber might claims to be just a technology platform connecting passengers to drivers, but was essentially involved with all aspects of the operations, several Indian e-commerce companies are much more than mere marketplaces. They select merchants, provide merchants with warehousing, carry out product checks and even handle delivery.

A note of caution

Having said that, it’s also important to realise that most of these online services started of as startups, and the option to bring on board contractors and vendors to provide the service on the ground allowed them to become a Uber or Flipkart. If the California Labor Commission ruling were to become binding, and if online services that act as Intermediaries are forced to directly employ all contractors/vendors, then startups with limited capital will not be able to enter similar businesses. Competition will decline, smaller merchants will find it difficult to find buyers, and they will be negatively impacted.

In my opinion, instead of classifying contractors as employees it’s important that certain ground rules are determined in regards to how and under what circumstances Intermediaries will be held responsible for the actions of its contractors and allow legal proceedings for the same.

Also Read:

– On the responsibility, accountability and liability of platforms, marketplaces and aggregators
– How Amazon India deals with Fake Products
– Here’s what Amazon, Ebay, Flipkart, Snapdeal and others said about honoring e-commerce warranties in India