The California Labor Commissioner's Office finally reached a decision that could have sweeping implications for Uber drivers. According to The Washington Post, regulators ruled that Uber drivers are employees, not contractors.
Uber tried to argue that drivers can't be employees because the company allows them to pick and choose when they want to work and which rides to accept. The commission disagreed, noting that Uber vets drivers and doesn't allow them to set their own rates.
So far, this ruling only applies to the woman who filed the case (the report notes that she "just wanted her money back"). But it could set a precedent for thousands of other lawsuits or a class-action suit for similar changes.
Of course, there will likely be an appeal or multiple appeals, but for now, let's take a look at what the implications of this case could mean for Uber and the share-based economy at large.
Uber Costs for Uber
Say this ruling does stick, and from now on, Uber and its rideshare ilk have to classify drivers as employees. What would that mean in practice?
In short, Uber would be responsible for a whole host of costs it dodged before:
- Employees' health care benefits.
- Workers' Compensation Insurance benefits.
- Employment taxes.
- Gas and car maintenance expenses.
Uber may have as many as 160,000 drivers nationwide, according to The Washington Post report. Unless the rideshare company has a deep employee-expense cushion built into its budget, those drivers may represent a serious ding in the bottom line.
Why Small Businesses Should Stay Tuned on the Great Uber Debate
The Uber case is a good reminder that misclassifying employees as independent contractors is a pricy misadventure. The Department of Labor continues to aid states so they can enforce proper worker classification through auditing programs. Employers who inadvertently misidentify employees as freelancers may be fined for violating Workers' Compensation laws and required to pay for other benefits and taxes.
Though you may very well find yourself in the position where you have to distinguish between employees and contractors when you hire help for your own business, you may be on the other side of the coin, too. For example, you may make a living as an independent contractor who offers services like those enabled by Uber or other tech platforms. These rulings may make it more difficult to preserve your freelancer status.
Regardless of what becomes of this ruling, one thing is certain: attitudes toward what work means and how it should be compensated in a share-based economy are still in flux. Hopefully, the trend toward fair compensation and benefits continues.
To learn more about app-based services clashing with old laws, read "ADA Compliance Continues to Plague Some Startups."