The California labor commission recently issued a ruling that may profoundly impact the sharing economy. For such a monumental ruling, the issue at hand was rather petty. A driver working for Uber filed a complaint for reimbursement of approximately $4,000 in expenses. The driver argued that as an employee of Uber, she was legally entitled to reimbursement for the costs incurred performing her job. Uber countered that its drivers are not employees. Rather, they were contractors that performed services for the passengers that they drove- Uber simply provided a platform enabling customers and drivers to find each other, and in the process earned a ‘brokerage fee’. The labor commission disagreed with Uber, and cited, among other factors, the various ‘boss like’ forms of control that Uber exercised over its drivers, including the vetting process in accepting drivers, the right to ‘fire’ drivers that were poorly rated, and the pricing limits that Uber imposed. Taken together, the commission found that the drivers are in fact employees of Uber, and as such, are entitled to the various legal protections available to employees.
This ruling may have a profound impact on the future of Uber and all companies that form the sharing economy. Employees are entitled to many legal protections that contractors are not, and requiring the companies to classify its drivers as employees will greatly increase their costs to the extent that it may undermine the entire business model of some firms. Because of the potential impact, Uber has filed an appeal of this ruling, and we certainly have not heard the last of the legal battle.
What may be surprising are the halachic ramifications of the employee- independent contractor debate. We find at least three areas in halacha where the distinction between an employee and independent contractor impacts the rights and obligations of the parties. This article will analyze the halachic criteria for each classification.
The first area involves labor law. According to Halacha, an employee is entitled to quit his job at any time without notice (provided this will not cause a loss to the employer)[1]. According to many Poskim, this applies even if the parties specifically executed a contract (or kinyan) binding the employee to fulfill the entire term of the agreement. Although parties are generally free to obligate themselves to any agreement that they see fit, the Torah has a specific objection against a Jew selling himself into slavery. Since locking an employee into a job and denying him the ability to quit resembles slavery, the Torah releases an employee from such agreements. However, this release applies specifically to employees. Independent contractors are not viewed as being similar to slaves, and therefore have greater obligations to complete their jobs.
A second discussion involves the prohibition of Ona’ah, overcharging or underpaying for an item. Shulchan Aruch rules that Ona’ah does not apply to employees (since they are comparable to slaves, which are also excluded from Ona’ah), while an independent contractor would be subject to Ona’ah[2]. Thus, an in-house attorney that is underpaid for his labor could not claim Ona’ah, while outside counsel that is underpaid could assert such claims. Of course the reverse is true as well; an employee that is overpaid for his services would have no obligation to refund the excess pay, while independent counsel would.
A third distinction involves hilchos Shabbos. One may not instruct a Gentile to perform melacha for him on Shabbos. This is why a Gentile employee may not work for a jewish-owned business on Shabbos. In contrast, a Gentile independent contractor that chooses to perform his work over Shabbos would not violate this prohibition.[3]
The question raised in the Uber litigation is of classification- what are the defining characteristics of an employee as compared to a contractor, and what tests are used to determine their classification? In halacha, we find two specific criteria- how the worker is paid, and the worker’s freedom in setting his schedule.
Terumas hadeshen 329 writes that the defining test is how the worker is paid. If the worker is paid an hourly or daily rate, he is treated as an employee. We view his wages as payment for the workers time. As such, he is similar to a slave with respect to the right to resign, and not subject to Ona’ah. In contrast, if a worker receives a set fee for performing the task, we view the worker as a contractor/kablan. The wages are viewed as paying for the service receieved, and not like buying the worker’s time. As such, there is no resemblance to slavery, and the rules of Ona’ah will apply, while the flexibility to resign mid-task will not.
A second criterion is mentioned by the Sma 333. Sma asserts that an employee is a worker that must work at specified hours. Since he has committed to work during these times, his freedom is diminished and his status is similar to a slave. Accordingly, he is exempt from Ona’ah, and may resign at any time. In contrast, a worker that has no obligation to work at set times, but is simply given a deadline by which he must complete his job, would be classified as a contractor/kablan. Since he is his own master, he has no similarities to a slave. As such, he would be subject to claims of Ona’ah, and also would be penalized if he quits mid-term.
Based on the above, a salaried worker that must work set hours is clearly an employee/poel, while a worker that is paid a set fee to perform a task and chooses when and how to work would clearly qualify as a contractor/ kablan.
There are however, a number of hybrid cases that defy simple classification. The first example is a part-time worker that is paid by the hour, but chooses which hours to work. Chachmas Shlomo 333:3 rules that such workers are contractors/kablanim- since they set their own schedule, they are not similar to slaves, and may not resign. This is consistent with the Sma’s criterion.
A second question involves a worker that has complete freedom as to how and when to perform the work, but is paid for the job on an hourly rate. An example would be an independent accountant or attorney- they work according to their own schedules, but bill by the hour. Mahari Enzel 15 categorizes them as employees/poel, which is presumably based on the Terumas Hadeshen’s criterion. It would seem that the Sma would classify such workers as contractors/Kablan.
Interestingly, these discussions do not apply to Hilchos Shabbos. There, halacha clearly looks solely at the way the worker is paid- an hourly worker that is paid for his time would be classified as an employee that is always forbidden to perform melacha on behalf of a jewish employer on Shabbos, while a worker that is paid a set amount to complete a task is a kablan, which is sometimes permitted[4].
Returning to the Uber case, the drivers seem to meet both criteria to be classified as a contractor/ kablan. The driver has complete control over his schedule, and decides when, and how much, to work, which would indicate they are contractors/kablan. In addition, the drivers are paid a preset amount per ride, which again indicates that they are contractors/kablan. However, there is a unique aspect of this case that must be considered. Once a Uber driver accepts a passenger through the Uber app, the driver must pick up the passenger immediately and drive directly to the destination. While the worker has absolute freedom to decline any particular job, once he does accept it, he has no discretion as to when to perform his task. In a similar case, Chachmas Shlomo 264 rules that such workers are employees/poalim (applying Terumas Hadeshen’s criterion of control of schedule, and focusing on the lack of control after accepting the job), while the Mahariaz Enzel 15 rules they are a kablan (since the worker chooses when to accept the work, and is paid for the task and not based on the time involved), while Nesivos 264 seems unsure. This dispute would apply to simpler cases as well. A barber is paid by the job and chooses when to work. Nevertheless, once he begins a job, he may not stop halfway through the haircut and tell the customer to return the next day.
Thus, Uber drivers’ status in halacha is unclear, and whichever way the U.S. courts ultimately rule, they will be on solid halachic grounds. In addition, while halacha has very specific criteria defining a poel or kablan, these classifications vary across different areas of halacha. Because a poel with respect to hilchos Shabbos may be a kablan with respect to Ona’ah, we cannot simply extrapolate to the halachic status of Uber drivers. We must determine the context of the question- what is the issue presented before the courts for which the driver’s status is relevant. Only then can we assess which of the halachic characteristics are determinant.
[1] Choshen Mishpat 333:3, 5
[2] Choshen Mishpat 227:33, 36
[3] provided the work could have been performed on a weekday, and that there is no Maris Ayin, (appearance of a worker doing melacha on behalf of a jewish employer).
[4] although a kablan that is instructed to perform melacha specifically on Shabbos is also prohibited, that is because of the concept of kovea melachto, which is distinct from the Poal/kablan discussion.