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Retail Law Advisor

Omni-Channel Marketing: Maximizing the [In-Store] Shopping Experience

Posted in Retail, Technology

omnichannelWhile retailers recognize that most purchases can be accomplished by conveniently using an electronic medium, they also know that “one click” shopping does not satisfy everyone. In order to capture this population and to entice the online shoppers to visit stores, brick-and-mortar retailers must use the technology available to co-exist with the virtual world and enhance the in-store experience. Studies show that 80% of store shoppers check prices online, with one-third accessing the information on their mobile device while inside the actual store. This percentage proves that consumers are approaching their experience from multiple angles. Consequently, retailers must consider ways to make the in-store experience multi-dimensional.

Enter omni-channel marketing. Omni-channel is a form of marketing that gives retailers the ability to cross brand using multiple formats and devices. This approach allows customers to create their own experiences, provides opportunities for retailers to be more competitive, and increases revenue. Retailers are streamlining their marketing efforts and the clear lines that once existed between online and brick-and-mortar operations have now become blurred.

Mobile applications have multiple functions. They are used to remind customers of prior purchases, to introduce new products, to deliver product discounts, and to complete purchases. These applications also allow customers to send text messages that reward them with in-store coupons, receive loyalty rewards to use toward future purchases and even pay for their purchase. All of this data is collected by retailers and used when establishing future marketing and merchandising efforts.

In addition to the numerous conveniences of personal devices, some retailers provide tablets within their stores for customers’ use when shopping. Still others have taken the next steps to entice consumers into their store and to send the shopping experience to new heights. Ugg has established the innovation lab which includes a large touch screen that enables shoppers to customize their footwear while in the store and have items delivered if they are not available at the time of purchase. Neiman Marcus has launched Memory Mirror at select stores. Memory Mirror is a giant video screen that remembers customers and what they have tried on. Memory Mirror enables shoppers to see outfits from 360 degrees, compare clothing options side-by-side, and email videos and photos of the clothing to others. The use of this technology allows customers to shape shopping experiences in ways that were never before possible.

The interactive experience that customers now have while shopping in stores is one that cannot be created by shopping online alone, and the converse is also true. The omni-channel marketing strategy allows customers to begin their experience before entering the store, maximize its potential while in the store and continue it long after leaving the store. As retailers continue to use technology to integrate the online and in-store experiences, the possibilities seem endless.

#Instagram, #Instafashion, #Instagood: A Fashion Foray into Instagram

Posted in Retail

Facebook Instagram AdsDespite its reputation for over-filtered pictures, fashion blogging on #Instagram has moved the needle and compelled the fashion industry to welcome a group of #fashionistas that traditionally have been considered the plebeians of the fashion world. The rise of the fashion blogger phenomenon, coupled with consumers’ insatiable desire for more personalized shopping experiences, has resulted in the genesis of curated retail that has revitalized the relationship between retailers and consumers. On their fashion pilgrimage from amateur blogger to aficionado of style au courant, #Instagram #stylebloggers have attracted from hundreds of thousands of followers (@menstylepro, @onedapperstreet and @articlesofstyle) to millions of followers (@chiaraferragni and @negin_mirsalehi) on their #Instagram accounts. In doing so, #fashion-bloggers have created a groundswell of customer engagement.

For established and up and coming brands alike, collaborating with a #styleblogger is a smart bet to increase “word of mouth” endorsements and is a penny-wise method of interacting with their target demographic. Most importantly, it is perceived by many as being more genuine than traditional marketing efforts, mainly because #stylebloggers have established personal and fun rapports with their followers based on candor and inspiration for daily fashion. When such collaborations are transmitted through social media such as #Instagram, a brand can broadcast its story from a different viewpoint while also tapping into the #stylebloggers’ loyal following. Bloggers give brands a new social medium to interact with their consumers in a very authentic way. Essentially, #fashion-bloggers express a brand’s vision in the blogger’s own voice that may ring more true with consumers than traditional advertising. Because readers often develop impassioned and trusting connections with #fashion-bloggers, they are more likely to wear clothes that are specifically recommended by bloggers and validated or “liked” by their peers, proving that peer validation reigns supreme for consumers.

With their celebrity-like qualities, such as strong personal branding and a devout following, #fashion-bloggers are very appealing to brands due to their direct ties to consumers. The fashion industry has long had a reputation for ignoring entire groups of people and body shapes, with the common response from consumers being that they can’t see themselves on the pages of these glamour lookbooks wearing these clothes. Followers of #fashion-bloggers, however, often feel closer to them because consumers perceive bloggers as real people with whom they can identify. By creating a real world experience for consumers by exposure of clothing through bloggers, a brand can realize strong customer growth. Brands like Burberry (@burberry), Urbanstox (@urbanstox) and AlexanderWang (@alexanderwangny) have used first-rate trendsetters to showcase their clothing and, as a result, realized increased consumer engagement and growth.

Today, many people first discover brands through social media. Given that fashion is a world based upon aesthetic artistry, it’s hardly surprising that #Instagram, which allows users to alter photos to best advantage, has garnered much respect from the fashion industry. Numerous retail brands have recognized the buying power of Instagram users, and, as a result, adopted trend-arousing #selfies and branded hashtags. With the popularity of @Instagram ever-increasing, it’s clear that amateur fashion blogging is the next form of social media to be exploited by retailers seeking to boost their market share.

Fashion Week Beyond the Photo Shoots

Posted in Retail

runwayWhat would the retail industry be without Fashion Week, the twice-a-year event series during which major designers launch their women’s ready-to-wear lines? What we see on the catwalk during this week highly influences consumer tastes – and sometimes behavior – in the coming season.

Fashion Week began in 1943 and seventy years later the event has grown into a series lasting more than a week, across four global locations, with major sponsors, streamed live to the public. This year Fashion Week in the U.S. takes place September 10 – 17. Last year, there were more than 275 events in the U.S. and this year’s calendar is similarly packed.

What most people know of Fashion Week they learn from pop culture. Whether Sarah Jessica Parker, Gwyneth Paltrow, Angelina Jolie or Kim Kardashian, readers want to know: who’s in the front row? Who’s wearing whom? Yet Fashion Week has more of an impact on the business world than a magazine spread.

Last year the New York Times published an economic report on Fashion Week at home and abroad. The article compares New York, Milan, Paris and London. New York lagged behind the other three locations in share of luxury brands using its event series to exhibit their clothing and accessories, but it has the most mainstream commercial appeal by a landslide. In 2012 it was reported that Fashion Week contributed an estimated $850 billion to the New York City economy. Fashion Week in the U.S. also has broader appeal as it is the only city among the four that also hosts a Men’s Fashion Week.

This year, U.S. Fashion Week will take place in a new location, moving out of Lincoln Center into two new spaces from The Skylight Group. The Skylight Group, an event venue and development firm, is the force behind redeveloping six New York City properties into raw event space. Fashion Week’s new destinations include a former post office processing facility and a former freight terminal. As this annual rite evolves and draws new, younger designers and followers, it also shows an increasing interest in the reuse of urban space to link past legacy with future potential. In addition, it’s clear that the high fashion world is as focused on the entire customer experience as mass-market retailers are.

Of course, we can’t leave this blog post without a note about how technology has changed the way people experience the retail world. Last year, Louis Vuitton developed an app to make the Fashion Week experience accessible, and more interactive, for people who are not able to be there in person.

While Fashion Week may be a peripheral event to many, the upcoming week’s events will lay the groundwork for the adoption of trends and technology throughout the retail industry.

Leveling the Playing Field: Mobile Location Analytics

Posted in Privacy, Retail, Technology

iconmonstr-smartphone-8-iconAs brick-and-mortar retailers face increasing challenges to compete with their online counterparts, a new tool is helping to level the playing field: mobile location analytics. Traditionally, online retailers have had an advantage over brick-and-mortar stores from the voluminous data that could be gathered while customers perused the retailer’s website. This has allowed online retailers to track, among other things, precisely how many customers are visiting their website and when, which websites those customers are being directed in from, which items customers are viewing and for how long, and which customers are buying what products. By better understanding customer behavior, online retailers can tailor their websites in order to funnel customers to the most profitable items, to offer customized advertisements and shopping experiences based on a customer’s prior browsing or purchasing history, and otherwise to enhance their website in ways that maximize customer acquisition and retention and ensure maximum profitability. Now, mobile location analytics is transforming brick-and-mortar retail by providing access to similar information about customers, which is allowing the retailers to improve their stores and the shopping experience for their customers in the same way web analytics has been doing for online retailers for years.

Mobile location analytics (MLA) generally refers to the study and analysis of location data that is gathered from cell phones, tablets, smart watches, and other mobile devices. Every mobile device with Wi-Fi or Bluetooth capabilities is assigned a unique identifier by the manufacturer, called a MAC address, which is constantly broadcasted whenever the Wi-Fi or Bluetooth function is enabled. Sensors can be installed in stores, malls, airports, hotels, and virtually anywhere else to pick up and record the broadcasted MAC address, which then can be used to track the location of that device – and the customer carrying it – with great accuracy. The gathered location data is then aggregated (along with data gathered in other stores using the same MLA provider or partner providers) and can be used to reveal customer patterns such as the percentage of customers walking by a store who enter it, heat maps to show the most common paths customers take through a store or mall, the amount of time an average customer will spend in a store, and the amount of time average customers spend at particular product displays. And because each MAC address is unique and is linked to a particular device, it also allows the retailer to track a customer over time, to identify repeat customers, and to know whether that customer has been to the retailer’s other branches or stores. With enough data points, it is even possible to infer age and gender of customers.

Though names, addresses, and other personal information are not linked to MAC addresses, the nature of the data gathered for use in MLA presents some obvious privacy concerns, particularly when customers are not aware that the data are being gathered or how they are being used. Some studies have shown that customers overwhelmingly disapprove of the practice. To help allay these fears, many of the major companies providing MLA services have taken significant steps to ensure customers’ privacy is maintained, including by de-personalizing the data immediately upon gathering it, by complying with a mutually-agreed upon Code of Conduct that requires certain privacy controls, and by providing an opt-out website that allows individuals to add their MAC address to a database that serves as a de facto ‘do not track’ list obeyed by many of the largest MLA companies. It also helps that the FTC publically has taken an interest and is keeping a watchful eye as the use of MLA technology increases.

Privacy concerns aside, MLA technology can provide significant benefits to all parties involved in the retail experience. Shopping center managers can use the technology to optimize the mix of tenants, to increase efficiency and improve traffic flow throughout the premises, and to maximize advertising effectiveness. Store owners can use the technology to improve their marketing efforts, to place products and staff more efficiently throughout their stores, to funnel customers to their most profitable products, and to provide a better overall shopping experience that increases the likelihood that a customer will provide repeat business. And even customers benefit from better access to the products they most often want, more helpful and relevant advertising, more effective customer service, and generally an easier shopping experience. Online retailers have had access to data that allowed them to provide analogous benefits for years. Now, with the increasing availability of MLA, brick-and-mortar retailers have a powerful tool to help keep up.

A Case of Caution: the Effect of Redevelopment on Existing Mall Leases

Posted in Development, Landlords, Leasing, Real Estate, Retail, Tenant

Escalators at shopping mallIn a follow up to our other posts regarding the White Flint Mall redevelopment, the jury has reached a verdict. Until recently, White Flint Mall in Bethesda, Maryland was a prime example of retail mall success. However, as the mall began to lose tenants and customers, its owner decided to redevelop the mall into a mixed-use town center. One of the mall’s tenants, Lord & Taylor, balked at the redevelopment and sued. Lord & Taylor recently gained a multi-million dollar jury verdict, and the case gave pause to retail landlords and tenants across the country.

In the 1970s, enclosed shopping malls were at the height of development. Developers looked to attract large, popular “anchor” stores to ensure a mall’s success. To attract such stores, landlords were often willing to give tenant-friendly leases with low fixed rents, long lease terms, and anchor-tenant control over changes in the mall.

In 1975, Lord & Taylor entered into a lease with White Flint LLLP, the owner of the mall, to become an anchor tenant. The lease term lasted until 2042 and provided that White Flint Mall would be operated as an “enclosed mall,” prohibiting the owner from making major changes without Lord & Taylor’s consent.

After the recession in 2008, White Flint Mall began struggling. According to the owner, the mall was no longer economically viable, especially after Bloomingdale’s, another anchor tenant, left the mall in 2011. The owner argued that other tenants left quickly and re-development became the only option.

Lord & Taylor instead claimed the owner’s plans for re-development began much earlier, and the departure of Bloomingdale’s was used as an excuse to encourage other tenants to leave. Lord & Taylor argued that the owner secretly negotiated the terms of the re-development, while letting maintenance and operations at the mall become abysmal.

When approached by the owner to discuss lease modifications, Lord & Taylor initially negotiated with White Flint LLLP but requested $100 million as compensation for losses it claimed it would suffer during the long course of the proposed re-development. Negotiations stalled following the refusal by the mall owner to pay such a large figure. Lord & Taylor then brought suit, alleging White Flint LLLP breached their lease by failing to get their consent to the re-development and requesting over $50 million in damages. Following a jury trial, the jury agreed with the plaintiff that White Flint LLLP had indeed breached the lease and awarded Lord & Taylor $31 million in damages. White Flint LLLP has said it plans to appeal the verdict.

This case provides a caution to landlords in the changing retail scene across the country and a relief to tenants who see landlords not keeping their best interests in mind during redevelopment.  The key takeaway from the events in White Flint for landlords is to retain flexibility in their long-term leases because market forces may require changes not envisioned at the time of lease execution. As a landlord considering redevelopment, review all leases at the outset to determine whose approval you need and what you can offer in return. The key takeaway for tenants is to know what areas of the property are most important for you to protect and negotiate, as Lord and Taylor did here, for certain consent rights in those areas. As a tenant, it is important to understand what leverage you have in your lease so as to play your hand to your maximum benefit. Both tenants and landlords should remember that taking a hard line on any issue may result in the decision being made by a judge or jury.

Trends in Urban Grocery Store Development in Washington, D.C.

Posted in Real Estate, Retail, Zoning

Shopping carts in a rowContinuing our coverage of trends in urban grocery store development, this post examines recent and ongoing activity in Washington, D.C., which is a leader in grocery-anchored, mixed-use redevelopment projects.

It’s not by accident that DC leads in urban grocery store development. District leaders have undertaken a concerted effort to attract new grocery stores through public incentives, and grocery stores are more frequently than not a focal point of rapidly changing District neighborhoods. By one count, more than thirty grocery stores have been developed or re-developed in the District since 2000, with twenty-five of those stores being supermarkets in excess of 30,000 square feet. Reports of the demise of grocery stores have, so far, been greatly exaggerated – at least in DC.

One trend in DC’s urban grocery growth has been the repositioning of older grocery-anchored strip centers or standalone supermarkets into multi-story, mixed-use developments. Examples include the Giant-anchored Cathedral Commons on Wisconsin Avenue, the Giant-anchored O Street Market in Shaw, and the so-called “Swift Safeway” in Petworth. The re-development of the so-called “Social” Safeway in Georgetown, like the Cathedral Commons, includes additional in-line retail alongside the grocery store. Below are a few themes that have emerged in DC and may apply to other older grocery stores and supermarkets prime for conversion into denser, mixed-use projects elsewhere in DC and in urban markets around the country.

Urban Design/Zoning

The urban design trend among the re-developed DC grocery stores has been to flip the script: whereas the conventional supermarket design places the store to the rear of its lot behind a large parking field, DC’s new grocery stores have uniformly built to the street line. Parking and loading are generally tucked underground or behind the building so that the building becomes an inviting and integrated part of the neighborhood streetscape.  Transit access and bike parking are often major features as vehicle parking is de-emphasized.

Another way DC’s grocery stores are flipping the script on the traditional model is with respect to use. While the legality of the vernacular DC residential district “corner store” languishes in the city’s comprehensive zoning re-write, many of DC’s new grocery stores brought multi-family residential components to the commercial use rather than the reverse – trying to shoehorn a grocery store into a residential area. As a result, many of the new grocery stores have multiple levels of residential development above the new stores, giving grocers a much-sought, built-in customer base immediately adjacent.

Neighborhood Relations

Complying with dimension, use and parking requirements of zoning is a key consideration of these new grocery-anchored developments. Just as important are neighbors’ concerns regarding, among other things, traffic, parking and other impacts from the new development, as well as the temporary closure of the store while redevelopment is underway. A community outreach and benefits strategy is as important for a grocery-anchored mixed-use project as it is for any other project. Even so, disputes are occasionally unavoidable.

Ownership Structure

A grocery chain faces many options about how to complete an infill development or re-development.  The store owner could partner with a local developer to handle the entitlements process and/or to develop, manage, and ultimately sell other uses (e.g., multi-family residential) integrated into its project. Depending on the jurisdiction, these options can include engaging in a sale-leaseback, creating a condominium with separate retail and residential units, subdividing the parcel, entering into a space lease or ground lease, or having a third party developer do the work on a turn-key basis. The precise structure of the arrangement will be unique in most instances and will depend on financing and the capital structure funding the redevelopment.

While neighborhood groups may initially be resistant to re-development from a traditional surface-parked grocery store to a denser mixed-use development, once constructed these developments offer the benefit of providing what is often additional transit-oriented residential development without ousting the original grocery store use.  (This is in stark contrast to what is happening with the re-development of gas station and car wash sites, where the original use is being eradicated.  DC has become so concerned about the loss of so many gas station sites that it has created an approval process required to permit an owner to eradicate a gas station use.) As developers around the country search for well-located urban sites for additional residential development and as grocers seek to establish and/or strengthen their foothold in urban markets, we may well see the models for re-development applied elsewhere.

3D Printing: Potential Pitfalls For Retailers

Posted in Intellectual Property, Liability, Retail, Technology
What is 3D printing? 

3D printing, a seemingly futuristic method of manufacturing objects, is steadily moving into the mainstream as three dimensional printers have relocated from labs to the shelves of retail stores.

3D printing, or additive manufacturing, is a method of production where small machines –robots – build three-dimensional objects layer by layer, directed by computer-assisted design (CAD) software, until the entire object is finished.  3D printers are used to build a host of materials, from the mundane – children’s toys or jewelry, to the useful – parts for your toaster or washing machine, and even the highly controversial, such as the functional guns made by 3D printers that have been profiled in the New York Times and the subject of recent television crime shows.

How is 3D printing currently being used in retail?

3D printers have been used commercially for decades, for example to produce prototypes in manufacturing.  Now, producers such as MakerBot have lowered the price point of 3D printers so they are accessible to the general public, and are being sold for use in homes and schools.

Established online 3D printing companies include Thingiverse, a MakerBot-affiliated website that people use to share designs, and Shapeways, which provides 3D printing services as well as an Etsy-like marketplace, which provides a place for aldesigners to sell the objects that Shapeways prints from their plans to the general public.  Now, major retailers such as UPS and Staples are creating brick-and-mortar locations for 3D printing.  UPS Stores throughout the United States are now offering 3D printing services where customers bring a CAD file, as well as selling printers to manufacture customers’ designs.  Staples, meanwhile, has partnered with a German 3D print retailer at a store in Hamburg to provide live demonstrations that will hopefully educate and entice customers to purchase 3D printers.

Intellectual Property and Liability Concerns with Retail 3D Printing

As with many new technologies, the rise of 3D printing triggers a host of intellectual property and liability concerns.  These concerns are most evident for retailers who are contemplating providing new 3D printing technology in their stores.  For example, it is entirely possible that a customer may bring a 3D design of a copyrighted object for printing at a retail 3D print shop.  If retailers facilitate the printing of copyrighted materials, they may expose themselves to liability and a potential lawsuit from a copyright owner for assisting in a customer’s copyright infringement.  (We note that although the safe harbor provisions of the Digital Millennium Copyright Act, which updated U.S. copyright law to conform U.S. law to the requirements of the World Intellectual Property Organization and address other copyright concerns in the digital age, apply to website providers, those protections do not currently apply to retailers who facilitate copyright violations at physical retail locations.)  Similarly, customers may request printing of patent-protected materials, and retailers who print such objects may be deemed to contribute to patent infringement.

3D printing also raises potential products liability concerns.  For example, if objects designed by customers and produced by retailers ultimately cause harm to an end user – which can include the obvious, like a functional gun, as well as harder-to-predict defective toy, then retailers who provide 3D printing services can potentially be liable for those harms, even if the retailers did not directly contribute to the alleged defect.

Given the host of potential liability that can arise from providing 3D printing services, retailers considering delving into the new world of 3D-based additive manufacturing should discuss their plans and the associated risks with counsel.

An A+ in Back-to-School

Posted in Retail, Retail Sales

7-Money-Saving-Tips-Back--School-ShoppingIt may only be the first week of August, but the retail world is already in full swing with one of its most important times of the year: back-to-school. Back-to-school is the second-biggest shopping season of the year, trailing only the holiday season. And the shopping trends, patterns and preferences of consumers continues to reflect broader consumer behavior trends and gives us a peek into what may come as we approach the holiday season. This year we’re seeing two important trends in back-to-school season: a slight decrease in overall spending and an increasing use of all retail channels, not just in-store visits.

After a decade of year-over-year growth, the National Retail Federation finds that families are expected to scale back their back-to-school shopping this year. It should be a fairly modest decrease ($38.92 per family) but it does point to a trend of families looking to shop smarter, perhaps in preparation for a larger splurge later in the year. To that end, consumers will seek more generic products, shop sales more frequently and reuse big-ticket items such as electronics for the younger students in the family as older students need new devices. This trend is also reflected in back-to-college shopping. Consumers are not retreating entirely; they are simply prioritizing. However, it does mean that  to capture the consumer’s interest and make the sale, retailers need to offer the right kind of experience and be ready at all times to deliver it to the influx of school shoppers.

As we wrote in an earlier blog post, consumers of all ages–and not just Millennials– are beginning to embrace the omni-channel shopping experience. Shoppers are looking for ways to find efficiencies in what can be a time-consuming project. Almost everyone, parents and students alike, can remember comparison shopping for the best price, seeking “just the right brand/size/color” to meet that year’s trends and scouring the aisles to find the newest gadget or coolest notebook. We still participate in the same shopping expedition today, yet it is often sandwiched in between two busy careers and multiple sports practices. Free shipping, online reservations, same-day delivery and ship-to-store are some of the online shopping features that parents want as they squeeze in a last week of vacation, shuttle their children to sports tryouts and practices, and prepare for a busy fall.

Retailers are making this job a little easier on families: offering in-store shopping lists and interactive maps to help power through the job, particularly useful for busy working parents and/or families with several children going back to school. Technology providers like Point Inside are helping retailers like Target build and launch these customer-centric offerings.

Even though we might be gazing out at tranquil water, reapplying sunscreen and leafing through the latest beach read, all indicators point to the world gearing up for its next retail push. The ever-savvy shopper continues to evolve and demand more from the stores in which they shop, the technology fueling the transactions, and the people behind the customer experience. Before we know it, we’ll be writing about the lessons learned from 2015 back-to-school and what we foresee for the holidays.

Uber Drivers: Employees or Independent Contractors?

Posted in Employment, Retail, Tax

uberdriverSince its founding in 2009, Uber has gained both praise and notoriety for shaking up the taxi industry by allowing individuals who meet minimum requirements to provide an on-demand car service via the Uber mobile app.  In December 2014, there were 162,037 active Uber drivers in the United States alone.  In San Francisco, where the taxi industry reportedly grosses $140 million a year, Uber now generates approximately $500 million a year.  Investors have flocked to Uber, too, pouring $2.7 billion into the company, bringing Uber’s estimated value to a whopping $41 billion as of December 2014.  But this meteoric rise has been accompanied by legal challenges in many jurisdictions around the world.  In particular, Uber is having to defend itself against claims that it has misclassified its U.S. drivers as independent contractors rather than as employees.

Why companies favor independent contractors

A company with employees must pay a variety of federal employment taxes and similar state taxes.  A company pays none of these taxes for an independent contractor, and the contractor pays its own expenses of doing business.  Thus, Uber’s independent contractors pay expenses such as gas and vehicle maintenance as well as self-employment taxes, all of which reduce Uber’s costs of doing business.

The risk of misclassification

It is difficult to calculate the monetary exposure Uber would face if all of its drivers were deemed employees, but the recent $228 million settlement between FedEx and 2,300 of its drivers provides an apt comparison.  In that case, the federal appeals court determined that FedEx had misclassified its California drivers as independent contractors.  Notably, the decision said: “Labeling the drivers ‘independent contractors’ in FedEx’s Operating Agreement does not conclusively make them so.”

Uber’s recent experience in California and New York

On June 16, 2015, the California Labor Commission awarded one Uber driver $4,000 in back wages and interest to which she was entitled as an Uber employee.  In the words of the hearing officer:

“Defendants hold themselves out as nothing more than a neutral technological platform, designed simply to engage drivers and passengers to transact the business of transportation. The reality, however, is that defendants are involved in every aspect of the operation. Defendants vet prospective drivers, who must provide to defendants their personal banking and residence information, as well as their Social Security Number. Drivers cannot use defendants’ application unless they pass defendants’ background and DMV checks.”

The decision further notes that Uber controls the prices and cancellation fees charged to riders, the payments to drivers, and the app that enables the drivers to work, all of which describe an employment relationship.  In addition to this regulatory proceeding, Uber is defending a pending class action lawsuit in California in which the judge, on March 11, 2015, denied Uber’s Motion for Summary Judgment.  The plaintiffs there are trying to extend the class action to include all drivers nationwide.

Uber’s followers did not have to wait long to see how similar cases would fare in other states.  On July 14, 2015, in an interview with Bloomberg TV, the chairwoman of the New York City Taxi and Limousine Commission gave the opposite opinion of the California Labor Commission: “We have wholeheartedly supported driver flexibility as independent contractors when we allow them, much to the consternation of the industry, to drive for several bases…so a driver is not an Uber driver.”

Takeaways from the Uber experience

Uber will likely face additional regulatory enforcement proceedings, lawsuits brought by individual drivers, and class actions representing many drivers in a variety of jurisdictions, each with its own laws governing the distinction between employees and independent contractors.  Thus, the results will likely be mixed.

Retailers should follow Uber’s experience and learn from it.  Know the relevant law in the state(s) in which you operate.  Also know that numerous federal lawsincluding those enforced by the IRS – are implicated by improper classification of independent contractors.  The IRS allows a company to submit Form SS-8 for a ruling as to the proper characterization of a contractor/employee, which a company may find particularly worthwhile if it has many of one type of contractor/employee.  As always, seek guidance from your lawyer regarding compliance with state and federal employment laws.