Initially, the Florida Department of Revenue found that Mr. McGillis had served as an Uber employee.

Uber contested this determination, and an evidentiary hearing was held before the Department of Economic Opportunity.

The Hearing

At the hearing, witnesses explained how Uber's transportation network software works. The software consists of two applications that generally are accessible on smartphones: a “user application,” used by individuals seeking transportation services, and a “driver application,” used by individuals willing to provide transportation services. Drivers receive a percentage of the fare charged to the passengers that is calculated based on an algorithm developed by Uber; variables include a minimum base fare, charges for mileage and time spent in transit, and a multiplier based on supply and demand in a particular location at a particular time. Uber processes payments to drivers weekly by direct deposit.

At the hearing, witnesses also explained that Uber supplies additional insurance coverage for commercial operation of a vehicle, but it does not provide other benefits such as medical insurance, vacation pay, or retirement pay. At the end of each year, Uber sends each driver a “Form 1099” – an Internal Revenue Service form used to report payments to independent contractors – setting out the amounts paid to the driver for the year.

It also was made clear at the hearing that a prospective Uber driver must agree to the terms and conditions of Uber's “Software Sublicense and Online Agreement.” This contract specifies that the driver is an independent contractor and not an employee. It further explains that the driver, as an independent contractor, is not entitled to unemployment benefits:

This Agreement is between two co-equal, independent business enterprises that are separately owned and operated. The Parties intend this Agreement to create the relationship of principal and independent contractor and not that of employer and employee. The Parties are not employees, agents, joint venturers or partners of each other for any purpose. As an independent contractor, you recognize that you are not entitled to unemployment benefits following termination of the Parties' relationship.

The contract further specifies that each trip request accepted is considered a “separate contractual engagement,” that drivers are “entitled to accept, reject, and select” requests as they see fit, and that drivers have no obligation to accept any request. (Uber may deactivate a driver's account if the driver's acceptance rate is persistently below a specified level or after 180 consecutive days of inactivity. Even if deactivated, however, a driver may request reactivation of the account and return to using the driver application.) Drivers are free to set their own schedules and to determine what locations they will serve.

A prospective driver is subject to a background check and must provide Uber with information about the driver's vehicle, registration, license, and insurance. Drivers are responsible for supplying, maintaining, and fueling their own vehicles. Uber does not require drivers to display Uber signage in their vehicles, nor does Uber control the drivers' attire. Drivers are free to switch between using Uber's driver application and the application of a competitor, such as Lyft.

Uber does not directly evaluate or supervise its drivers. Instead, passengers rate their drivers on a scale ranging from one to five stars. If a driver's overall rating falls below the level set by the region's general manager and no improvement is shown, Uber may deactivate the driver's account.

At the hearing, Mr. McGillis indicated that, during his time as an Uber driver, he experimented with when and where to use the driver application. He spent his own time and money investigating the most profitable times and locations. Uber did not reimburse him for any costs related to this market research, such as the cost of gas. Moreover, although Mr. McGillis left his previous job to use Uber's driver application, Uber did not require him to do so. Nor did Uber prohibit him from receiving ride requests from Lyft's driver application. In fact, Mr. McGillis switched between using Uber and Lyft at his discretion.

The Department's Order

Following the hearing, a special deputy recommended a reversal of the department's order. The special deputy found that Mr. McGillis had served Uber as an independent contractor and, therefore, was not entitled to reemployment assistance.

Mr. McGillis filed exceptions to the recommended order.

In a detailed final order, the executive director of the Department of Economic Opportunity adopted the special deputy's recommended order and overruled Mr. McGillis' exceptions:

The agreement between drivers and Uber specifies that the relationship is one of independent contractor, and the actual course of dealing confirms that characterization. Drivers have significant control over the details of their work. Drivers use their own vehicles and choose when, if ever, to provide services through Uber's software. Drivers decide where to work. Drivers decide which customers to serve. Drivers have control over many details of the customer experience. Drivers may provide services through, or work for, competing platforms or other companies when not using the Uber application. On these facts, it appears that Uber operates not as employer, but as a middleman or broker for transportation services.

Mr. McGillis appealed to the Third District Court of Appeal.

The Court's Decision

The court affirmed the department's order, finding that Mr. McGillis had not performed transportation services using Uber's software application as an “employee” within the meaning of Chapter 443.

The court said that it based its decision to uphold the department's order on “the usual common-law rules applicable in determining the employer-employee relationship.”

In particular, the court observed, the parties' agreement “unequivocally” disclaimed an employer-employee relationship and the parties' actual practice reflected the written contract. The court agreed with the department that “the central issue” was “the act of being available to accept requests” – and that this control was “entirely in the driver's hands.” The court added:

Drivers supply their own vehicles – the most essential equipment for the work – and control whether, when, where, with whom, and how to accept and perform trip requests. Drivers are permitted to work at their own discretion, and Uber provides no direct supervision. Further, Uber does not prohibit drivers from working for its direct competitors.

Accordingly, the court agreed with the department's assessment that:

[a]s a matter of common sense, it is hard to imagine many employers who would grant this level of autonomy to employees permitting work whenever the employee has a whim to work, demanding no particular work be done at all even if customers will go unserved, permitting just about any manner of customer interaction, permitting drivers to offer their own unfettered assessments of customers, engaging in no direct supervision, requiring only the most minimal conformity in the basic instrumentality of the job (the car), and permitting work for direct competitors.

The court stated that, due in large part to the “transformative nature of the internet and smartphones,” Uber drivers such as Mr. McGillis “decide whether, when, where, with whom, and how to provide rides using Uber's computer programs.” This level of “free agency” was “incompatible with the control to which a traditional employee” was subject, the court concluded.

The case is McGillis v. Department of Economic Opportunity, No. 3D15-2758 (Fla. Ct.App. 3d Dist. Feb. 1, 2017). Attorneys involved include: Shutts & Bowen LLP, and Daniel E. Nordby (Tallahassee), and Andrew E. Schwartz (Fort Lauderdale), for appellee Department of Economic Opportunity; Littler Mendelson, P.C., and Courtney B. Wilson, for appellee Rasier, LLC.