Uber and The ‘Employee vs. Independent Contractors’ Conflict

Uber, the on-demand car service, has been facing numerous legal battles across the country from its drivers, who are filing lawsuits claiming that they have been misclassified as independent contractors. The drivers seek changes in their employment status and want to be recognized as Uber’s “employees” and, therefore, they are entitled to be reimbursed from Uber for expenses such as gas and vehicle maintenance.

Uber has now moved to settle class action suits in California and Massachusetts brought by its 385,000 drivers for $100 million. A term of the settlement, amongst others, will allow Uber to continue classifying its drivers as independent contractors. The company, however, made concessions allowing drivers to receive tips and to form an association (but not a union) to discuss grievances with the company.

It remains to be seen whether or not Uber will win the ultimate war, as the company still faces multiple lawsuits in other states. If the other lawsuits are not settled, it could result in a costly, unfavorable outcome for Uber and similar on-demand, on-line businesses.

The conflict of the “employee vs. independent contractors” classification is becoming an increasingly crucial employment issue for companies such as Uber and Lyft in the current “on-demand” economy. Uber has been arguing that its drivers are independent contractors, and not employees, because the drivers can set their own hours and they work according to their own schedules.

The drivers on the other hand are challenging their classification as independent contractors because they want to receive the wage protection from Uber that normal employees receive. Classification as “employees” would bring forward the following benefits to the drivers: Uber will be required to pay them in accordance with state wage and hour laws, reimburse them for expenses necessarily incurred while working, reimburse their tips, withhold and pay taxes, and compensate non-exempt employees for overtime hours. An employee, as opposed to an independent contractor, will also be eligible for social security, unemployment insurance and workers’ compensation benefits.

If you have any questions or seek information about the employee and/or independent contractor classification, please use the contact form below or call us toll-free at 1-888-456-2529.