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Uber-Confusing? Are Workers in the Sharing-Economy Space Employees or Independent Contractors?

Alternative employment models are picking up steam across the country, but with these new opportunities and structures come some legal concerns over how to classify these employees. Misclassifying an employee can lead to disastrous consequences for an employer, who may be suddenly forced to pay out benefits associated with employee status if said employee can argue he or she was entitled to them all along as an employee and not an independent contractor.

Sharing-Economy Companies Ignite Employee/Contractor Debate

Companies like Uber are calling the employee/contractor debate right back into the mainstream. In what appears to be a gray area, some preliminary rulings and perceptions have the potential to change the tide.

According to a recent decision from the California Labor Commissioner’s Office, driver Barbara Ann Berwick should have been classified as an employee rather than a contractor. This ruling entitled Berwick to over $4,000 in costs and expenses from her eight-week stint as an Uber driver last year.

Uber has long maintained that it is simply an app to link passengers and drivers, with no control exerted from a central office about the hours a driver should be working. “The number one reason drivers choose to use Uber is because they have complete flexibility and control,” the company said in a statement. “The majority of them can and do choose to earn their living from multiple sources, including other ride sharing companies.” Uber has argued for years that its drivers are independent contractors, not employees, and that it is “nothing more than a neutral technology platform. The labor office disagreed. According to the administrators there, there were multiple other occasions where Uber behaved like an employer. Unsurprisingly, Uber has appealed that decision.

A Tricky Situation

Right now, the ruling does not extend beyond the experience of Ms. Berwick, and the question could be quelled if Uber’s appeal is successful. In as many as five other states, Uber has already won cases claiming that drivers are independent contractors and not employees. What makes the California case different is that government officials are the ones who formally outlined the case for classifying Uber drivers as employees. California law requires employers to reimburse business expenses, and there are a few suits currently pending against Uber on the same grounds.

Freedom or Cost-Cutting Measure?

Other sharing-economy companies such as Lyft and Instacart argue that their workers are independent contractors because of the flexibility and freedom afforded by grabbing tasks from an app.  Labor activists, however, believe that workers might be giving up too much in the process, instead taking on uncertainty and being a benefactor of little more than a company’s attempt to save on expenses. Labor activists believe companies like Uber maintain considerable control over drivers’ workplace behavior and such control is typically the symbol of an employee relationship, which should bring with it benefits, more stable pay and greater job security.

According to former secretary of labor Robert Reich, losing out on job security and foregoing typical job protections is a risky business and ones that requires more analysis. He argues that while some workers do take these positions because of a preference to work as an independent contractor, others are forced to because there are no better opportunities out there.

The legal uncertainty of how these critical first cases will go in establishing precedent has the potential to alter how sharing-economy companies work in the future. While they are certainly trendy, a decision to treat workers as employees could influence profits and success over the long run.


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