"If they are, in fact, W-2 employees eligible for unemployment benefits then Uber is in the wrong."
This actually brings up a fascinating tax issue:
The IRS has a ~20 question test to determine if the worker is an employee or an independent contractor, questions like Do you set the worker's hours? Is the relationship continuous and ongoing? and Do you have direct control over their work? The IRS stresses no one question makes the determination, rather the overall picture.
There is also what I snarkishly refer to as "Question 21", a safe harbor regulation which basically says the owner can't be individually disadvantaged if treating employees as independent contractors is standard practice in your industry, in your area. The threshold is either 20% or 25%. The rule is there so the IRS won't close down a business, by forcing one owner to do what none of his competition must. There are other rules, too: you have to spell out the relationship in a pre-hire contract, and you must issue a 1099 if required.
When I learned of this during an IRS intensive in 2011, I made a bee-line to the teacher after the class and said, "Safe harbor sounds like if enough people around you are breaking the law, you can too!" The teacher leaned in to me and said That's EXACTLY what it means.
Uber may win: The workers set the hours, choose to take fares or not, have no uniform or behavior rules other than basic decency, and Uber fulfilled the 1099 requirements. Of course, if YOU make more than 20%-25% of the workers in your industry, in your area, I sure hope safe harbor doesn't apply.