Uber/GrabCar drivers: Independent contractors or employees?

Amicus Curiae
Jennidy S. Tambor

Posted on September 07, 2016

After the buzz on the issue of legality of having Uber and GrabCar operate in the Philippines had died down due to the Department Order No. 2015-011 issued by the Department of Transportation and Communications (DoTC) on May 8, 2015 creating a new classification of public transport, yet another legal issue arises: whether or not drivers accredited by TNCs are employees or independent contractors.

As a backgrounder, the order outlined the new classifications for public transport, which now include the online-enabled transportation network vehicle service (TNVS). Borrowing from the California Public Utilities Commission, the DoTC Order states that “an organization, whether a corporation, partnership, sole proprietor or other form, that provides prearranged transportation services for compensation using online-enabled application or platform technology to connect passengers with drivers using their personal vehicles,” will be referred to as transportation network companies (TNCs).

The Land Transportation Franchising and Regulatory Board (LTFRB) issued Memorandum Circular No. 2015-015 providing rules and regulations to govern the accreditation of transport network companies, pursuant to the DoTC Order. Article VI of the said circular provides: “The TNC shall exercise due diligence and reasonable care in accrediting drivers. The TNC shall be liable for failure to exercise due diligence and reasonable care, except if such non-compliance is due to acts or omissions outside of the TNC’s control. However, such liability shall not extend to actions of drivers, who are independent contractors who provide the transportation service directly to passengers.”

Given that the DoTC Order borrowed the concept of TNCs from the California Public Utilities Commission, it is prudent to examine a controversial case in California relating to Uber.

Last year, the California Labor Commissioner’s Office ruled that a driver for the ride-hailing service Uber should be classified as an employee, not an independent contractor. The ruling ordered Uber to reimburse Barbara Ann Berwick $4,152.20 in expenses and other costs for the roughly eight weeks she worked as an Uber driver last year. While Uber has long positioned itself as merely an app that connects drivers and passengers -- with no control over the hours of the said drivers -- the California labor office cited many instances in which it said that Uber acted more like an employer.

The said case sparked a class suit from Uber drivers.

Just recently, however, Uber ended such suit by entering a settlement with the complaining drivers. Under the agreement, which settles lawsuits filed in California and Massachusetts, Uber will continue to classify drivers as independent contractors but pay as much as $100 million to the roughly 385,000 drivers involved in the lawsuits. The ride-hailing company also agreed to concessions, including providing drivers with more information about why they are banned from the service and create a “Drivers Association” in both states to address drivers’ concerns.

While LTFRB Memorandum Circular No. 2015-015 categorizes the drivers accredited by TNCs as independent contractors, the Board’s subsequent Memorandum Circular No. 2015-016, which imposes terms and conditions on a certificate of TNC accreditation, has become a spur toward this other legal issue against the categorization set in the prior circular.

In determining the existence of employer-employee relationship, the following elements are generally considered: (1) selection and engagement of the employee; (2) payment of wages or salaries; (3) exercise of the power of dismissal; and (4) exercise of the power to control the employee’s means and methods of accomplishing the work. The Supreme Court considers the last element, which is commonly known as the “right-of-control-test,” as the most significant test of the existence of employment relationship.

At this point, it is important to point out that the subsequent LTFRB Memorandum Circular No. 2015-016 imposes on all holders of a Certificate of TNC Accreditation various responsibilities, including:

• The accredited TNC shall conduct a criminal background check and screening to all its applicant-drivers before endorsing them to the Board.

• The accredited TNC shall accredit an applicant-driver, who possesses a professional Driver’s License.

• The accredited TNC shall only accredit drivers who have demonstrated the ability to read, write and speak Filipino and English languages.

• The accredited TNC shall establish a continuing Training Program for its accredited drivers so that they may have the most updated and current information of the use of digital application, safety and standards, and terms and conditions applicable to them.

• The accredited TNC shall employ a “Zero tolerance drug and alcohol policy” with respect to its accredited drivers.

• For purposes of enforcement, the accredited TNC shall provide the Board, within thirty (30) days from issuance of the Certificate, the mechanism on how to check and verify whether or not a driver is active on the dispatch system application, en route to a passenger location or engaged with a passenger in a pre-arranged ride. Specific information on specific drivers, passengers or rides shall be provided upon request by the Board.

• The accredited TNC shall have physically inspected the vehicle through its process of accrediting vehicles.

• The accredited TNC shall not allow accredited TNVS vehicles to be installed with a top light or taxi meter.

While the LTFRB Memorandum Circular No. 2015-015 classifies the drivers as independent contractors, the foregoing responsibilities imposed on TNCs under Memorandum Circular No. 2015-016 may be cited as indicia of an employer-employee relationship given the required control that these TNCs are to impose on their drivers. The terms and conditions imposed by the subsequent Memorandum Circular 2015-016 thus somewhat pose a question as to the validity of the classification of drivers as independent contractors.

Since TNVS and TNC are innovations in the Philippine transportation industry and as these apparently also affects our labor laws as it did abroad, it is worth looking forward to the innovations from Congress and how the Supreme Court will resolve the issues arising from this new system of mobility.

The views and opinions expressed in this article are those of the author. This article is for general informational and educational purposes only and not offered as and does not constitute legal advice or legal opinion.

Jennidy S. Tambor is an Associate of the Angara Abello Concepcion Regala& Cruz Law Offices (ACCRALAW), Davao Branch.

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