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Uber will pay fine to state workers' compensation division

  • Author: Sean Doogan
  • Updated: September 28, 2016
  • Published September 3, 2015

Ride-sharing service Uber has agreed to pay a $77,925 fine to the state of Alaska over unpaid workers' compensation insurance for its drivers. Uber operated in Anchorage for about six months before pulling out of Alaska.

In the Aug. 25 settlement, Uber admitted no wrongdoing. The company agreed not to return to Alaska until it is in compliance with state workers' compensation laws.

The state Department of Labor and Workforce Development said it began an investigation into Uber's business practices when the company began offering rides in Anchorage in October 2014. But the investigation never made it to a hearing because Uber pulled out of Alaska in March 2015, facing a judge's order that it operate for free and failed negotiations with the city of Anchorage.

Rhonda Gerharz, the chief investigator for the special investigations unit of the Department of Labor and Workforce Development, said that when Uber was offering rides in Anchorage, the company was operating under the assumption that its drivers were contractors and not employees.

The Department of Labor disagreed, but Uber wasn't charged with violating state laws because the company stopped operating in Alaska while the investigation was ongoing -- the matter never got to a formal hearing.

"It's just an allegation," Gerharz said. "It's a settlement agreement because Uber left the state."

Any company paying employees must also pay for workers' compensation insurance, which pays for medical treatment and care after an injury at work.

Drivers who have been approved by Uber pick up customers through a smartphone app. Payments are made through the app and Uber takes 20 percent of each ride as a "technology fee."

Other states, including California, have also ruled that Uber drivers are employees of the company and not contractors.

The workers' compensation insurance issue was just one of many roadblocks the company faced when it tried to start its service in Anchorage.

The city went to court to stop Uber from operating because it didn't comply with the city's taxi ordinances -- rules requiring drivers to get city-sanctioned background checks, have video cameras in their cars and have a certain amount of collision and liability insurance.

The Anchorage Taxicab Permits Owners Association also objected to Uber's entry into the Anchorage market, saying Uber drivers should have to abide by the same laws that govern taxis. That includes the requirement that they purchase taxicab permits, which can cost tens of thousands of dollars.

In October 2014, an Anchorage Superior Court judge ruled Uber could only operate in Anchorage if it continued its initial free ride program. The judge prohibited Uber from charging for rides until it could come to an agreement with the city over the details of its operations. Uber paid its drivers but did not charge its customers in Anchorage for about six months before pulling out of Alaska entirely.

Negotiations between the city and Uber have been stalled ever since.

"Nothing. They aren't going anywhere," Assemblyman Dick Traini said.

Uber did not respond to a request for comment on the recent settlement with the Department of Labor.

A bill that would have exempted all "transportation network companies" (including Uber) from having to classify their drivers as employees passed the Alaska Senate last session and was sent to the House Labor and Commerce Committee for consideration when the Legislature reconvenes on Jan. 19, 2016.

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