Our New York Employment Lawyer has seen in a rise in the number of misclassification cases and that tide may continue to increase as two recent federal judges in California ruled that a jury should decide whether Uber drivers and Lyft drivers are employees or independent contractors. In both cases, the drivers are claiming that they are employees and thereby entitled to employee protections such as minimum wage, overtime pay, employee benefits, and statutory protection from discrimination and harassment. Uber and Lyft claimed in their motions that the drivers are properly treated as independent contractors. The judges in both cases stated that there are factual disputes about the classification analysis and the ultimate classification question should be decided by a jury. This was a big win for the drivers.
Both of these cases or a Department of Labor audit can have a significant impact on a company’s business model. Here, if Uber and Lyft do not prevail at trial, they will have to reclassify its workforce and that can be expensive and alter their profit computations. One of the stated policy reasons why misclassification of workers is wrong is because it can put companies on unequal playing fields. If one company is treating its workers as employees and complying with the law while its competitor is misclassifying its workers as independent contractors – well, the competitor could have unfair advantage because its costs will be lower and it may be able to win more consumers as the lowest cost provider. Let’s look at the some of the factors Judge Chen in the Uber case found important.
1. Did Uber control the work details – a company does not have to exert control in every area but the inquiry is did it exert all necessary control over the individual’s work
2. Could Uber terminate the working relationship at any time without cause – this is more indicative of an employment relationship than a contractor;
3. Was the drivers performing services that are the same as offered by Uber?;
4. Is the work done by a driver usually done under the direction of the company or a specialist without supervision in that geographic area?;
5. The drivers’ skill required to perform the services;
6. Whether Uber or the driver provided supplied instrumentalities, tools and the place of work. The driver’s investment in his equipment;
7. The length of time that the services are performed by the drivers – generally, an indefinite period is more indicative of an employee where a discreet finite period is more indicative of a contractor;
8. Whether the drivers’ work contributions are part of Uber’s business;
9. Whether the parties jointly believe the worker is an employee or contractor; and
10. The drivers’ opportunity for profit or loss.
The court stated that no one factor is dispositive, rather a balancing test of the factors should be considered. Critically, the court stated that Uber is a transportation company that could not exist without its drivers. Further, the court stated that Uber exerts a significant amount of control over its drivers and the amount of revenue they earn. Third, the court said that whether an worker is an employee or contractor is a mixed question of law and fact and a question that is generally decided by a jury. Now that Uber’s motion has been denied, expect vigorous discovery battles regarding the misclassification factors to take place.
If you have any questions about whether a worker is an independent contractor or employee, contact our award winning employment lawyer at (800) 893-9645 for a confidential consultation. A misclassification error can result in many unintended consequences affecting many workers and lead to a class action claim or government audit. Early steps are important for workers and companies.
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