Workers in the “gig economy,” including Uber and Lyft drivers, have been agitating for better working conditions, as well as speaking out against the low pay and lack of labor protections offered by the tech giants. This week, a Superior Court judge in California handed gig economy workers a major victory, ruling that Uber and Lyft workers must be classified as employees rather than independent contractors.
There are some benefits to being classified as an independent contractor, such as the flexibility to set your own work hours and freedom from management and supervision. However, independent contractors are also exempt from certain worker protections guaranteed by the Fair Labor Standards Act (FLSA), such as the right to earn minimum wage and overtime pay. Therefore, employers hoping to keep overhead costs low have much to gain by classifying workers as contractors instead of employees. The judge in the Uber and Lyft case, the Hon. Ethan Schulman, said that being classified as independent contractors causes measurable harm to these companies’ drivers.
“The judge said Uber and Lyft have refused to comply with a California law passed last year that was supposed to make it harder for companies in the state to hire workers as contractors, so gig economy workers such as drivers for the ride-hailing companies would receive health insurance, workers’ compensation and paid sick and family leave,” NPR reported. “As independent contractors, Uber and Lyft drivers are not provided these benefits.”
“It bears emphasis that these harms are not mere abstractions; they represent real harms to real working people,” Judge Schulman said. “To state the obvious, drivers are central, not tangential, to Uber and Lyft’s entire ride-hailing business…Our state and workers shouldn’t have to foot the bill when big businesses try to skip out on their responsibilities. We’re going to keep working to make sure Uber and Lyft play by the rules.”
According to the Internal Revenue Service, a worker must meet three requirements to qualify as an independent contractor:
- Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Are the business aspects of the worker’s job controlled by the payer? (These include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
- Are there written contracts or employee-type benefits? (i.e. pension plan, insurance, vacation pay, etc.) Will the relationship continue and is the work performed considered a key aspect of the business?
If a worker is classified as an independent contractor when they should be classified as an employee, they are often shortchanged for the work they perform. This certainly seems true in the case of Uber and Lyft drivers. Although Uber has claimed that the average Uber driver, working as an independent contractor, makes $25 dollars per hour, many economic experts dispute that number. As independent contractors, drivers have to pay their own business expenses, such as gas and car maintenance. In 2018, the Economic Policy Institute found the median wage for Uber drivers after expenses and fees was $9.21 an hour. That’s well below the rate considered a “living wage” in places like Los Angeles and New York City, where the cost of living has skyrocketed in recent years.
For now, the ruling only applies to Uber and Lyft drivers in California. But this case might encourage other courts to follow suit, compelling tech companies to pay more and do more to protect gig economy workers.