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A new ruling is the latest setback for Uber's business model

The legs of the mighty “gig economy” wobbled Thursday when it was announced that the New York State Department of Labor ruled that two ex-Uber drivers are employees, not independent contractors.

The state ruled in favor of the drivers, Jakir Hossain and Levon Aleksanian, in August, after the New York Taxi Workers Alliance filed a federal lawsuit on their behalf, demanding unemployment payments. The ruling was made public by the Alliance on Thursday.


“For nearly a year, as the Department of Labor dragged its feet, I was so broke that I had to borrow money to pay my rent and I racked up credit card debt for the first time,” Hossain said in a statement. “After Uber deactivated me for having a 4.3 rating, I was no longer able to send money home to my family in Bangladesh and I couldn’t afford basic living expenses.”

The move is a victory for opponents of Uber’s business model in New York: the Taxi Workers Alliance is now pushing for a “comprehensive audit” of Uber to designate all workers as employees, protected by labor law and entitled to benefits. The department has said rulings are on case-by-case basis.

“Together, professional drivers from all sectors are standing up for their rights and fighting back against the Uber-led race to the bottom that lowers working standards and weakens labor protections all for New York drivers,” the Workers Alliance said in a press release following the announcement.

Uber, on the other hand, argues that its drivers “love” the status quo, adding that the New York ruling has no effect nationally and that 13 other states have so far ruled drivers to be independent contractors.

“Drivers use Uber on their own terms; they control their use of the app, along with where and when they drive,” Uber said in a statement responding to the ruling. “As employees, drivers would lose the personal flexibility they value most — they would have set shifts, earn a fixed hourly wage, and be unable to use other ride-booking apps.”


“While the Department of Labor has ruled that several drivers are independent contractors, we have appealed the other determinations,” it added.

The ruling is the latest setback for Uber, which is fighting similar cases around the country. Several Uber drivers won employee status in California in August in a case similar to the one in New York. Meanwhile, attorney Shannon Liss-Riordan is waging a class-action suit against the gig-economy behemoth to win employee status for all drivers in California. In August, the court denied an Uber request for a $100 million settlement.

Uber’s statement also pointed to a poll by the marketing firm Benenson Strategy Group taken last year, which showed that 88 percent of drivers enjoyed Uber’s schedule flexibility. Of course, that data point indicates nothing about drivers’ views on their rights to employee benefits, insurance, or job protections.

That’s the kind of thing that worries drivers like Gamaledin Mohamed. “Uber is a good company,” he said, barreling down 47th Avenue in Queens. He stressed that he enjoyed the freedom of the job, but he also favored moves to unionize the drivers. “We should have benefits, yes. If you have a fight, you want someone to fight for you.”

A third driver, Jeffrey Shepherd, not a plaintiff with the other two, has yet to win his own case. The state deemed him a contractor after he read about Hossain and Aleksanian’s lawsuit and filed an unemployment claim, which the taxi alliance says was due to an error in paperwork.

The group expects Shepherd to eventually be classified an employee too.