Uber Driver: Employee or Independent Contractor?

Despite a recent update to California law making it more difficult for employers to classify workers as independent contractors rather than employees, some companies including Uber may be attempting to misclassify drivers.

Uber Driver Employee Misclassification Overview

According to a recent California law known as AB5, many workers who have previously been classified as independent contractors and denied the protections and privileges afforded to employees may now qualify to be reclassified. California Assembly Bill 5 (AB5) was signed into law by the state’s governor, Gavin Newsom, in September 2019.

The law went into effect on Jan. 1, 2020, and requires most companies that hire independent contractors to reclassify these workers as employees. This classification is important, as employees and independent contractors have different legal rights when it comes to wages and benefits.

According to some current and former drivers for Uber as reported by Wired, the ride share company may be attempting to misclassify drivers in order to avoid paying overtime wages and benefits. According to some estimates, reclassifying Uber drivers as employees would cost the company more than $3,600 each year.

Currently, Uber driver contractor jobs do not entitle workers to overtime pay, minimum wage, paid time off, or other benefits afforded to employees. Additionally, Uber drivers and other independent contractors do not have their employment taxes or Medicare contributions withheld by their employer, requiring them to pay these costs on their own.

When this lack of benefits is added to the costs of owning and maintaining their own vehicles, many Uber drivers make much lower than minimum wage.

How is an Uber Driver Contractor Defined?

Before AB5 went into effect, the law allowed Uber and other gig work employers to classify workers as independent contractors. However, under the new law, several factors must be taken into account when determining employee classification.

AB5 requires employers to use a test referred to as an ABC test when determining how to classify workers. Only if all three parts of the test are true can an employer classify a worker as an independent contractor.

The ABC test is made up of three parts. The first part states that the worker must be free to perform their job without the direction or control of the employer. This may include the worker being able to set their own hours and use their own tools or vehicle to perform their job. According to part A, it may appear that Uber contractor drivers qualify as independent contractors. However, parts B and C must also be true.

Part B of the ABC test states that the worker must also be performing work that is outside of the normal scope of the work conducted by their employer. As Uber drivers are performing work, driving, that is core to Uber’s business, drivers may not pass this part of the test.

While traditional independent contractor jobs may look like a construction worker building an addition onto an office building, or a plumber fixing a leak in a small business, Uber drivers work for a company whose main course of business is driving. Uber has tried to get around this requirement by claiming that the company is a technology company that simply provides drivers with a platform to find passengers, rather than a transportation company.

The third part of the ABC test requires independent contractors to be engaged in their own independently established trade, doing the same type of work they perform for their employer. This prong of the test would require Uber drivers to also independently work in the transportation industry.

Why are Some Uber Driver Employees Classified as Independent Contractors?

In an attempt to comply with new law, Uber has made some changes to the way the company operates in California. Now, some California employees are able to set their own payment rates for rides, and receive more information about the ride before accepting it. Prior to the law, drivers had minimal information about potential passengers.

Now, drivers can see travel time, distance, destination, and the estimated fare before they accept the ride. Additionally, drivers are now allowed to reject ride requests without being penalized.

Although these recent changes appear to be bringing Uber closer into compliance with AB5, some people have criticized the changes, stating that they are merely giving drivers the illusion of having more autonomy than they do.

According to critics of the changes, while drivers may be able to set their own rates, setting their prices too high may lead to less passengers, while setting them too low may leave them without a profit. Additionally, even with these changes, Uber drivers still won’t pass the second part of the ABC test, which requires them to be doing work that is outside of the company’s usual scope of business.

Is Misclassification Illegal?

Although misclassification itself is not strictly illegal, it often leads to illegal actions, such as denying workers pay for all hours worked, failing to pay overtime wages, and refusing to allow protections that workers may be legally entitled to.

These protections and benefits may include the option to be covered by health or disability insurance through the employer, eligibility for unemployment benefits, eligibility for worker’s compensation benefits, and coverage under workplace safety and employment anti-discrimination laws.

How Can You Get Help as a Misclassified Employee?

If you believe you are a misclassified employee, you may have legal options available to you. Victims of wage theft and other employment-related issues may be able to report their employer to the IRS. In order to do so, you may be able to fill out IRS Form SS-8, which requests the IRS to determine your employment status.

If you are a Uber driver contractor who believes you have been misclassified as an independent contractor rather than an employee, you may be able to speak with an experienced attorney about your legal options. Victims of employee misclassification may be able to recover compensation and reimbursement for lost wages and other expenses.

Join a Free Uber Lyft Misclassification Class Action Lawsuit Investigation

If you are an Uber or Lyft driver (active or inactive), you may have been misclassified as an independent contractor, and you may qualify to join this Uber Lyft Driver Misclassification Class Action Lawsuit Investigation.

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This article is not legal advice. It is presented
for informational purposes only.