If you weren’t distracted by Donald Trump throwing his comb-around into the presidential ring this week, you might have noticed that the California Labor Commission ruled that an Uber driver was an employee, rather than an independent contractor. This meant she was entitled to approximately $4000 in expenses and other costs incurred while driving for Uber. While the Labor Commission’s ruling only applies to the one employee, it is still worth taking a look at the case, for several reasons.
First, the ruling may encourage other Uber drivers to file claims, something that’s relatively easy to do in California. Second, the Labor Commission stated reasons for its ruling, which will be useful in some class action suits that are in process.
The most important reason you should be paying attention, however, is that the ruling has broader implications for companies in general, and “on-demand” startups in particular. A lot of companies are trying to cut their HR overhead by classifying workers as “independent contractors,” rather than as “employees.” By doing so, they hope to avoid dealing with employment taxes, overtime rules, and paying benefits. I’m not just talking about small companies and startups like Taskrabbit, mind you. Fedex has been trying it, too, saying that its drivers – you know, the guys who wear Fedex uniforms and drive Fedex trucks and deliver Fedex packages on Fedex routes during Fedex hours – aren’t really employees. The Ninth Circuit Court of Appeals ruled last August that Fedex drivers in Oregon and California could move forward with lawsuits claiming they were incorrectly classified.
The key in these cases, and in employment law in general, is the degree of control that the company has over the worker. While there is no single formula, there are a number of different factors that courts and labor commissions look at. Essentially, the more control over the worker that the company has, the more likely the worker is an employee, not a contractor. Control can be shown through requiring uniforms, providing equipment or tools for the job (like computers, trucks, etc.), setting work hours, requiring the worker to operate from a set location, and setting rules for how the worker does the job, among various other factors. Consequently, it’s important for companies to carefully evaluate what they expect from workers, and the degree of control they need over such workers, before just classifying someone as a contractor. Taking the time to structure the relationship properly can save a company a great deal of money and headaches, if a worker tries to challenge the classification.
Follow me on Twitter @PaulHSpitz