Uber’s business model has been challenged following a decision from The California Labour Commission which ruled that a driver was an employee and not a third-party contractor.
The ruling means Uber, which has around 1 million drivers worldwide, will have to meet the California labour laws which means it may have to grant all drivers benefits and cover expenses such as fuel, insurance and repairs.
The result in one of the most tech orientated states could be of great significance to Uber and means that it is classified as a transportation company rather than a software business.
Business Insider pointed out that of if all Uber’s drivers are deemed employees it will shift the business model drastically because the company will have to significantly downsize the number of drivers in order to provide employee benefits to them all.
The company has received much backlash globally and has received injunctions in five European countries, including Belgium and the Netherlands as well as being banned in Germany and Spain.
The ruling came in response to a case brought against the company by one of its San Francisco drivers named Barbara Ann Berwick.
Uber is appealing the Labour Commissioner award of around $4000 to Berwick.
A spokesperson for Uber said: "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 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."