Business

Are Uber and Lyft Drivers Employees?

By Adriaan Brits Friday, June 19, 2020

In recent months, Uber and Lyft drivers had been spotted on strike while demanding higher pay and an increase in benefits. Drivers from these companies have found themselves misclassified in their respective jobs, being labeled as independent contractors. This misclassification resulted in a decrease in the number of benefits available to their hard-working drivers.

At the start of January 2020, the California Public Utilities Commission finally ruled that these drivers are considered employees, not independent contractors.

Employees or Independent Contractors?

Owners of both Uber and Lyft repeatedly claim that their drivers were, in fact, independent contractors. Unfortunately, independent contractors do not receive some of the same benefits as employees.

For example, independent contractors are not eligible for safety by employment or labor laws and are held personally responsible for setting aside their income taxes instead of relying on their employer. Though the drivers were initially misrepresented as independent contractors, under California's new gig law, AB-5, they are legally considered employees.

Not What the Companies Wanted to Hear

Both companies are disgruntled and believe that their drivers' acknowledgment as employees will cause mass economic destruction. Uber has stated that they will continue to work on providing increased benefits and more options to protect their drivers. Uber and Lyft attempted to indicate that if their drivers were officially recognized as employees, they would lose 90% of their drivers.

However, this analysis is not fully certified, and the entirety of the report has been denied publication. CJ Macklin was quoted in a short statement simply saying he believed that the forwardness and ruling of California's Public Utilities Commission were flawed. This does not inspire confidence in the legitimacy of their company and its reasonings for mislabeling their drivers as independent contractors.

What Happens If You Are Mislabeled as an Independent Contractor?

There are unfortunate consequences that result from being labeled as an independent contractor rather than an employee. Some of these consequences could include paying your Social Security and Medicare payments directly from your wallet or being ineligible for benefits such as unemployment and workplace rights. Certain companies can bring in more money by purposefully labeling their would-be employees as independent contractors.

If you believe that you are being misrepresented in your company, the first step you can take is merely communicating with your employer. Some companies may be more likely to respect their team members' voices and opinions. Others, like Uber and Lyft, might become defensive. Whatever way your company decides to handle it is up to them, but you'll be confident that you tried your best to keep the misunderstanding within company walls.

If this course of action shows no success, there are other ways to handle it. If you decide to take further action, you will be able to fill out an SS-8 form, free of charge, detailing what information and events have led you to believe that you are being misrepresented in your company.

Following receiving your completed form, the IRS will then reach out to your employer to hear the story from their point of view. The IRS will then determine what title best corresponds with your duties within the company.

What are the Consequences for a Company Mislabeling Their Employees?

If a company mislabels an employee as an independent contractor without reasonable cause, they may be faced with some unfortunate consequences. The consequences can be anything from being held liable for not paying for charges such as overtime or minimum wage to receiving penalties for items such as Social Security and Medicare.

Your company may also suffer copious amounts of backlash and loss of company reputation. Though these may not seem like a tremendous inconvenience for your company, Uber and Lyft thought the same thing and now are pouring in obscene amounts of money, energy, and resources to pull themselves out of the hole they have dug for themselves.

Will Uber, Lyft, and Similar Companies Ever Comply?

Though we can't see into the future of this California vs. Rideshare predicament, these companies don't appear to be budging any time soon. It would serve your company and any companies handling both employees and independent contractors well to gain a clear understanding of the differences between the two.

Deciding upon a plan and course of action for handling outside talent may have been just the ticket these rideshare companies needed to avoid what has now turned into a horrible company blow-up.

About the Author


Headshot for author Adriaan Brits

As an analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in Advanced Analytics & Media.