How a Supreme Court ruling on an Uber driver could remake Pennsylvania’s gig economy

(*This story was updated on 7/29/20 at 8:17 a.m. to correctly reflect that Justice Christine Donohue wrote the decision.)

The Pennsylvania Supreme Court ruled late last week that Uber drivers are not self-employed, but instead, “as a matter of law,” are controlled by the tech giant.

The ruling does not make every app-directed worker a full employee overnight. But to labor advocates and attorneys, the ruling does the next best thing: It builds the legal scaffolding for lawsuits and regulatory actions to expand gig workers’ workplace protections and access to the social safety net.

“Very few courts have been able to address this straight on like the Supreme Court did here,” Julia Simon-Mishel, the attorney for Philadelphia Legal Assistance who won the case, told the Capital-Star.

The suit, Lowman vs. Unemployment Compensation Board of Review, found that the driver, an out-of-work Philadelphia behavioral health specialist named Donald Lowman, did not forfeit an unemployment check by driving for the rideshare company, as he was not a self-employed independent contractor.

“In the virtual world in which Uber operates, it monitored and supervised [the driver’s] provision” of services, Justice Christine Donohue*, who was elected as a Democrat, wrote. He was joined by all four colleagues elected as Democrats in the 5-2 ruling.

A state unemployment board had originally found in 2016 that Lowman was an independent contractor for Uber, and was ineligible for payments. Attorneys for Uber and Gov. Tom Wolf had argued for that same interpretation in front of both appeals courts.

But their arguments were unsuccessful, as the Supreme Court affirmed an unanimous finding by the Commonwealth Court, a lower-level state appellate court dominated by Republicans, that Lowman’s jobless benefits should be restored.

The ruling, labor attorneys noted, also dispelled many arguments frequently used by gig companies to classify app workers — whether they are walking dogs, delivering groceries or providing ride-hailing services — as independent contractors.

Drivers can refuse assignments, the court pointed out. But Uber can also kick drivers off the app if they decline too many rides. Drivers also do not set their own compensation or build their own client base.

The ruling also rejected app-based companies contention that, because Uber drivers set their own hours, they are independent of the company.

In an email, Uber was quick to downplay the court result. 

The $50 billion company pointed to a footnote in the ruling that clarified the high court was not ruling that Lowman was an employee — a caveat that Simon-Mishel and others agreed with.

“While this decision did not determine the driver’s status, we stand ready to work with the Commonwealth to modernize our laws, so that independent workers receive new protections while maintaining their flexibility,” Uber spokesperson Harry Hartfield told the Capital-Star.

The ruling also does not have any direct consequences for Uber driver’s right to unionize, said Laura Padin, a senior staff attorney at the National Employment Law Project. Union rights for private employees are governed by federal, not state, law.

But she believes drivers deserve employee status, and added that the Lowman case’s precedent could be used in new legal cases.

“The decision strongly suggests that the court believes Uber is an employer under Pennsylvania law, and is misclassifying its drivers as independent contractors,” Padin said in an email to the Capital-Star.

Whether drivers actually want to be full employees of Uber is a matter of debate. An informal survey in May by The Rideshare Guy found that 71 percent of drivers wanted to remain independent contractors. But that number was down from 81 percent pre-COVID-19. 

Meanwhile, the number of drivers who’d prefer to be employees increased, from almost 10 percent pre-COVID, to 17.5 percent during the heath crisis.

‘Do their damn jobs’

Overall, the rulings’s short-term significance is muddied by the pandemic, and additional federal assistance approved through the end of the year, Simon-Mishel said.

Gig workers would typically be unable to apply for unemployment, but the federal CARES act allows independent contractors and others to access the social safety net.

But for someone who lost a different job and has taken to app work to fill in holes in their household budget, the ruling could make a big difference. 

Now, their benefits will only be reduced from gig work, not cut entirely.

“That is vital in a pandemic like this where things are ever-changing, [and] what access people have to work is changing everyday,” Simon-Mishel said.

For Angela Vogel, a member of the Philadelphia Drivers Union, the ruling was vindication.

Not an official labor union under federal law, the group represents thousands of rideshare drivers in Philadelphia.

Vogel told the Capital-Star that she has long said that Pennsylvania did not need any new laws to protect app workers. Instead, the state needed was a legal precedent followed by dedicated enforcement.

Members of the union have filed hundreds of complaints to the state Department of Labor and Industry for wage theft, she said, only to be rejected out of hand.

Now, the department will need to “change their default reaction in the system when someone is a Uber driver.” 

The ruling’s precedent, Vogel said, will not just result in drivers keeping unemployment payments when driving, but could even lead to driver’s getting unemployment for lost hours or being deactivated by the company.

“We are ready to translate this legal victory into real worker power,” Vogel said. “But we do need our state government and city governments to do their damn jobs.”

Regulators should apply the ruling broadly and proactively, she added. That could include fines and back payment of employer fees.

For example, in 2019, neighboring New Jersey fined Uber $649 million for misclassifying drivers. The payment would cover unpaid unemployment and disability insurance taxes between 2014 and 2018.

Other states, such as New York, can show an example to the contrary.

In a Tuesday ruling, a federal judge found that the New York Department of Labor had overseen an “inexcusable” delay in unemployment benefits to Uber and Lyft drivers, the New York Times reported. The department, the judge found, “has allowed itself to be led by the leash” by the companies, who did not hand over driver’s earnings data to process claims.

In an email, Pennsylvania Department of Labor and Industry spokesperson Penny Ickes said that unemployment officers “will examine the record to make findings of fact for each case, and apply the law and court precedent to make each determination.”

Mark Shade, a spokesperson for Attorney General Josh Shapiro, said in an email that the office is reviewing the decision to determine its impact.

Lauren Cox, a spokesperson for Philadelphia Mayor Jim Kenney, said that some citywide labor laws, such as a wage theft law and anti-retaliation law due to COVID-19, already applied to independent contractors.

How the ruling will impact other labor laws, such as Philadelphia’s paid sick leave ordinance, is still under review, Cox said.

Some app-based companies, including Uber, Lyft, DoorDash and Instacart, have temporarily provided paid leave to workers diagnosed with COVID-19. But those benefits have been hard to access or use.

Amid pandemic, gig workers’ jobless benefits at center of upcoming state court decision