Are “Community Drivers” Employees or Independent Contractors?
You’re driving somewhere anyway, so why not pick someone up and give them a ride, and make some cash for the favor? Companies like Uber and Lyft are exploiting this idea across America, turning everyday drivers into employees of their nationwide cab services. But are they employees? The companies don’t think so, but some of the drivers are starting to wonder.
Drivers for both Uber and Lyft have recently filed lawsuits in federal court, claiming that they are being incorrectly classified as independent contractors instead of employees. The stakes are high on both sides. Employees get a wide range of benefits that independent contractors are not entitled to, including minimum wage guarantees, overtime, and expense reimbursement. Expense reimbursement is particularly attractive to Uber and Lyft drivers, who use their own cars, buy their own gas, and pay for their own maintenance and wear and tear on their vehicles. Employees are also covered by workers’ compensation and unemployment, are entitled to Family and Medical leave, and the list goes on.
For employers, adding employees to the workforce instead of adding independent contractors means adding payroll costs for workers’ compensation insurance, unemployment insurance, social security and more. Independent contractors are simply cheaper for companies than employees, all else being equal.
Tests for Independent Contractor Status Could Go Either Way
Clearly the companies want us to believe they are hiring independent contractors. The first line of text on the Uber website for drivers says “Drive with Uber and earn great money as an independent contractor.” The website goes on to make statements such as “As an independent contractor with Uber, you’ve got freedom and flexibility to drive whenever you have time.” Advantages of being an Uber driver include “Set your own schedule” and “No office, no boss.” As an Uber driver, you get to “choose when you drive, where you go, and who you pick up.” But it is well-established that being an independent contractor or an employee depends less upon what your employer says you are and more upon what you actually do.
Determining independent contractor status involves a lengthy analysis of more than a dozen different factors. So far in the cases filed in federal court, both employers have filed motions for summary judgment to dismiss the complaints against them, but in both cases the judges held there were enough factual questions that the cases should go to trial, if they don’t settle out of court before then. For instance, despite what Uber says on its website, it appears that the companies do exert a significant amount of control over the driver’s work and set standards for what drivers can charge and what their vehicles must be like. Another critical aspect is that Uber and Lyft appear able to terminate their drivers at will. All of these factors point to the drivers as employees and not independent contractors.
Both lawsuits have been filed in the same northern California federal district court in San Francisco, where both Uber and Lyft are headquartered. To read the judges’ opinions denying the summary judgment motions, head over to the Northern District court website and look at the Cases of Interest section on the right-hand side of the page.