On September 4th, the New Orleans City Council approved UberBlack (not UberX) with a minimum fare of $15 per ride, among the most expensive in all of the cities in which Uber operates. The minimum fare in New York is $8. Baton Rouge approved the ride-sharing service in July after a drawn out battle with Yellow Cab.
After much local coverage and major opposition from cab and limousine services who say that apps like Uber disturb the playing field because they do not have to comply with the same regulations as legal chauffeurs, the insurance industry is weighing in on the approval.
In July, Louisiana Insurance Commissioner Jim Donelon issued an advisory warning passengers and potential Uber/ride-sharing drivers that their personal auto insurance policies may be inadequate to protect against the hazards that come with commercial driving.
“Drivers should review their policies and talk with their agents regarding their participation in such programs prior to signing up,” said Commissioner Donelon. “Virtually all personal auto insurance policies exclude coverage when personal vehicles are used to give rides for fees.”
Uber carries insurance for its drivers which kicks in should the driver’s personal policy leave gaps in accident coverage. Riders also have the capability to rate drivers and cars and Uber has been required in New Orleans to have a no tolerance drug policy and background check procedure.
However, it is unclear whether or not Uber’s arrival in New Orleans and Baton Rouge has any implications for workers’ comp coverage, but one would imagine that the question will be coming, especially now that two class action lawsuits have been filed against Uber by Massachusetts drivers who claim (among tip skimming allegations and other violations) that they are misclassified as “independent contractors” by Uber.
The complaint justifies the dispute by emphasizing the degree of direct control that Uber has over the drivers, including hiring and firing. This is one of the tests generally used to determine whether an independent contractor is actually a direct employee. The complaint alleges, “…drivers are required to follow a litany of detailed requirements imposed on them by Uber and they are graded, and are subject to termination, based on their failure to adhere to these requirements (such as rules regarding their conduct with customers, the cleanliness of their vehicles, their timeliness in picking up customers and taking them to their destination, what they are allowed to say to customers, etc.)” Read further details on that case from Staffing Industry Analysts here.
Forbes contributor Robert Wood seems to agree with the drivers’ suit, at least in spirit, and cites major liability concerns for ride-sharing companies like Uber. Wood opines: “Independent contractor v. employee characterization questions span medical malpractice cases, tax disputes, worker compensation and unemployment matters and more. Even employment discrimination and sexual harassment cases. As many tax, employment, insurance and labor disputes reveal, workers labeled as independent contractors may be employees. Arrangements can be genuine or can be independent in name only, with no chance of standing up against the IRS, other agencies or the courts.”
As for Uber’s operation in Baton Rouge and New Orleans, local attorney Bobby Truitt (with The Truitt Law Firm in New Orleans) thinks the question of whether Uber drivers are employees or independent contractors is less cut and dried than many have decried. Truitt explained: “…claims by Uber that their drivers are independent contractors may have some merit. The standard test for whether an employee is truly an independent contractor is the degree of control that the principal exercises over the employee; in this case, the drivers are subject to a myriad of rules dictated by Uber. From the perspective of worker’s compensation, an adverse ruling could price a service like Uber out of the market if the company were obliged to provide worker’s compensation for the drivers.”
In New Orleans, only UberBlack is approved to operate, and those drivers must meet more stringent qualifications. The Legal Examiner blog out of Detroit published a helpful delineation of the difference. UberBlack (the original Uber service) is:
- Premium option
- Licensed chauffeurs of black sedans and SUVs
- Follows state law
- Background checks on drivers
- $1 million in liability insurance
- Cars inspected once a year to earn certification sticker that’s visible on back window to police
Uber X, the more common, extra-income for the driver, cheaper fares for the customer situation, is as follows:
- Low cost option
- Drivers use their own vehicles
- No licensed chauffeurs, and not required to get “vehicle for hire” licenses
- Background check on drivers
- $1 million in primary coverage – when a driver is transporting a passenger
In Baton Rouge, where UberX is operational, local attorney Kirk Landry cites Uber as a veritable boon for public safety in a city where LSU games are de facto festivals and cabs are notoriously scarce. “Our firm [Keogh, Cox & Wilson, Ltd.] encourages our attorneys and staff to use Uber whenever any of them have consumed any alcohol that may impair their driving,” Landry said. “Baton Rouge has always had cab service, but in the 30 years that I have been here they weren’t very consumer friendly—they were usually difficult to find, frequently late or no-shows, and generally have not been viewed as a reliable means of transportation. Uber seems to have changed the marketplace here in a positive way.”
This change in the marketplace toward more customizable, quicker and cheaper rides, brings the “independent contractor” classification into the spotlight again. Unlike Truitt, Landry believes that the question of Uber drivers’ employee status under Louisiana’s Workers’ Compensation Act is fairly clear. Citing Franklin v. Checker as possible guidance for future issues in Louisiana, plus the strict definition of “independent contractor,” Landry explained: “…at first blush it does not appear that Uber drivers would be classified as employees under the Louisiana law. [Franklin v. Checker] was factually driven, but the relationship between that driver and Checker seems to be similar to that of what I understand the Uber relationship to be. My thoughts are qualified by the fact that I have not actually seen the agreement that Uber and its drivers may execute, and am not privy to other terms or conditions of their relationship. My thoughts are based on the way that the Uber drivers have told me that they operate and are compensated and my observation of how that occurs in the practice. They may not even be independent contractors at all, but instead something else.”
Until the cases in Massachusetts are decided, we are likely to see the “something else” argument get a lot of play in various Uber states, including possibly in Louisiana. In response to that legal threat, Uber spokesman Taylor Bennett employed the quintessentially American language of entrepreneurship and capitalist enterprise. Bennett said in a statement, “While we can’t comment on active litigation, I can tell you that Uber will vigorously defend the rights of drivers to build their own small business, and riders to enjoy competition and choice.”
Editor’s Note: A recent trip using UberBlack in New Orleans revealed the general satisfaction Uber seems to have imparted on both professional drivers and the business community. My driver David, who arrived within five minutes of in-app summoning in a black Escalade, explained that he has been busy since UberBlack was cleared in New Orleans. A professional, licensed chauffeur by trade, David explained that he wasn’t worried about a workers’ comp claim interfering with his business, and emphasized that he enjoyed the freedom of turning the app on and immediately being able to make some extra cash. “People downtown love it,” he said. “I’ve gotten a lot of positive responses. I think it’s fair how it works, for me at least. I don’t feel like I’m in danger of anything from [an insurance perspective.]”
Image Credit: Life, Tailored