The question of whether drivers for the popular mobile ride-share service Uber are employees or independent contractors has been hotly contested since the founding of Uber in 2009. Uber has consistently characterized its business as a platform that connects people seeking rides with independent contractors. This arrangement is very valuable to Uber, if not necessary for its survival, because the company is not required to comply with complicated regulations in place for taxi services. Uber also avoids substantial expense for Social Security, Workers’ Compensation, unemployment insurance, and other employment related expenses.
A California Uber driver alleged that the company violated California labor regulations by not paying for miles driven during work in accordance with the 2014 IRS mileage rate and not reimbursing toll expenses during employment. Uber maintained that such requirements did not apply because the driver was an independent contractor not an employee.
The determination of whether an individual is an independent contractor or employee is a fact intensive analysis and a parties’ agreement labeling an individual an “independent contract” alone is not determinative. The California Labor Commission (“Commission”) considered several factors including: whether the driver has a “distinct business” from Uber; whether the individual’s work was a part of Uber’s “regular business”; whether the worker supplied his or her own supplies for performing the work; and the extent to which Uber exercises control over its drivers.
Here, the Commission emphasized the necessity of drivers to comply with Uber’s numerous business requirements. The Commission acknowledged that drivers sign a contract labeling them as “independent contractors.” However, Uber exerts significant control over drivers by requiring specific insurance coverage, vehicle specification, background checks, and other controlling measures. The Commission found drivers to be employees because Uber “retained all necessary control over the operation as a whole.”
While this decision is not binding on Ohio employers, it does serve as a good reminder to review independent contractor relationships. Employers are well advised to closely scrutinize their relationships to ensure that employees are not mischaracterized as employees. FHKA Attorneys are well versed and available for more information or guidance on proper classification of employees and independent contractors.
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