Uber and Lyft Drivers May No Longer be Independent Contractors

A recent landmark ruling by the California Supreme Court has sought to clarify the status of employees and independent contractors for workers in the “gig economy,” including such companies as Uber, Lyft and Postmates.

The California Supreme Court’s ruling landed in favor of workers for Dynamex Operations West, further clarifying what it means to be an employee versus an independent contractor.

Workers in a “gig economy” job essentially take jobs on the basis that they will be paid for each job or service they take. Some of these companies include ride sharing companies like Uber or Lyft as well as delivery companies like GrubHub and Postmates.

Workers for these companies are most often classified as independent contractors. Companies like this usually want to classify workers as independent contractors because they are not bound by labor laws that regulate minimum wage, meal and rest breaks as well as overtime pay. Additionally, if a company classifies workers as independent contractors rather than employees, the employer does not have to pay for certain benefits such as health insurance or vehicle costs.

The California Supreme Court’s ruling adopted the “ABC” test for classifying workers as independent contractors or employees. This is a test that other states, including Massachusetts and New Jersey, have already adopted. This test is more stringent and more employee-centric than federal law.

The ABC test classifies a worker as an independent contractor if the employer can prove the following three things:

A.) “that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact; and

B.) “that the worker performs work that is outside the usual course of the hiring entity’s business; and

C.) “that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”

Gig economy employers like Uber and Lyft have traditionally maintained that their workers are independent contractors and not employees. In this manner, these employers do not have to pay vehicle costs or health insurance and are not bound by overtime or meal and rest break laws.

According to Prospect, “If the hiring business fails to prove any one of the three elements, the workers are employees entitled to minimum wage and premium pay for overtime work and to reimbursement for business expenses such as the cost of using a vehicle to conduct the business.”

This new ruling clarifies what a true independent contractor is. For example, a worker like a plumber or electrician who does not work in the industry that he or she is being hired by, is considered an independent contractor. He or she does work as an independent business.

However, a person who does work from home for a company within the same hiring business, under this new ruling, might really be deemed an employee.

This ruling was based on Dynamex Operations West v. Superior Court, in which Dynamex had classified its workers as employees until 2004, and then designated them as independent contractors. The drivers were now responsible for all of their own vehicle costs including insurance, gas, tolls, and maintenance.

If you work in a California gig economy job and believe you should be classified as an employee, it may benefit you to speak with an experienced attorney. You may be entitled to benefits, such as health insurance, retirement plans and paid time off.

Join a Free California Independent Contractor Class Action Lawsuit Investigation

If you work as an independent contractor in California for a gig economy company, you may be entitled to employee rights.

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