Uber Ruling Threat To App-Based Cab Business

                                

A ruling in the US threatens to send shockwaves through a global start-up which has revolutionised the taxi industry.

The California Labor Commission has ordered that a driver for the cab service Uber should be considered a company employee, not an independent contractor.

The ruling could undermine the entire business model of the controversial mobile-based ride hailing service, which has sparked mass protests by black cabs drivers in London.

By treating drivers as independent contractors, the firm does not have to pay benefits.

But classing them as employees would mean Uber having to pay out significant amounts for social security, workers' compensation and other charges.

Video: Uber On Driving Forward

Additional operating costs could also push up fares.

And it has possible implications for similar operations such as Uber rival Lyft, the household help service TaskRabbit, and cleaning service Homejoy.

The ruling comes after driver, Barbara Ann Berwick, filed a claim last year saying Uber owed her unpaid wages and other expenses.

Uber argued it was simply a technological platform used by independent drivers and their passengers to arrange and pay for rides.

However, the commission found Uber acted like an employer, and the driver, like a pizza delivery person, was an employee.

State hearing officer Stephanie Barrett wrote while Uber claims to be a "neutral technological platform" for independent drivers, it sets most of the terms of employment.

Uber and its management team are "involved in every aspect of the operation," including vetting prospective drivers and sacking them if their rating levels were low, she said.

As a result, Ms Barrett said Uber must "indemnify an employee for all that the employee necessarily expends in the discharge of the employee's duties".

San Francisco-based Uber said the ruling is non-binding and only applies to one driver. It is also appealing the decision.

But TechFreedom, a Washington-based think-tank, said the decision could have a negative impact on Uber and others in the so-called "sharing economy" where individuals use their own resources for business.

Uber has become one of the world's most valuable start-ups, worth an estimated $50bn, as it has expanded to more than 50 countries.

But it has faced regulatory hurdles and protests from established taxi operators in most locations where it has launched.