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California commission rules Uber driver is an employee, not independent contractor

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Uber may have a big problem with its business model in California. A commission there ruled this morning that an Uber driver is in fact a company employee — not a freelancer — which means that Uber could have to grant drivers benefits and cover other expenses, including gas, insurance, and repairs. Because Uber has been leaning on its drivers to cover those costs, it's been able to grow the number of cars it has on the road quite quickly. Should this ruling eventually apply more broadly, Uber may face far more significant issues with scaling than it has until now. That said, the ruling is likely to be good news for Uber's California drivers, who won't be hung out to dry should they run into trouble on the road.

California Uber drivers aren't all employees because of this ruling

As Uber notes in a statement, the ruling applies to only a single driver for now. So while the commission determined that the driver was an employee based on how Uber acts, it doesn't mean that all drivers are immediately bound as employees. However, it could indicate where other rulings will land in the future.

California's Labor Commission made the ruling, according to Reuters, with its commissioner saying that it found Uber to be "involved in every aspect of the operation," meaning that it's more than just an app handling logistics. The commission awarded a driver over $4,000 in expenses that they'd sued the company for. Uber plans to appeal the reward, according to the report. The company has long maintained that its drivers are independent contractors, though there's been an ongoing dispute about their status. It's likely that this is not the final word in California — the issue is also supposed to be presented in front of juries — but the result in one of the largest and most tech-heavy states is going to be of critical importance to Uber.

Correction: The California Labor Commission's ruling applies only to a single driver. This article previously stated that it broadly found drivers to be employees.