Are Uber Drivers Employees or Independent Contractors in California?

In recent years, Uber and other rideshare companies have been involved in a legal battle over whether their drivers are employees or independent contractors. Because Uber operates internationally, some states and even other countries have weighed in on the classification issue.

The state of California recently made headlines by passing Assembly Bill 5 (AB5), a controversial law that makes it harder for employers to classify workers as independent contractors. Although the law was targeted at Uber, Lyft, and other gig economy hiring platforms, it applies to all workers in California, barring those in certain exempt professions. The law is effective January 1, 2020.

Employee Versus Independent Contractor: Why It Matters

It's important to know why it matters whether a company classifies a worker as an employee or independent contractor. In general, employees are entitled to a host of protections and benefits that independent contractors are not necessarily entitled to, including:

• wage and hour laws, including the right to minimum wage, overtime, meal breaks, and reimbursement of business expenses
• antidiscrimination laws, including the right to be free from discrimination and harassment in the workplace
• payroll withholdings, including state and federal tax withholdings
• workers' compensation benefits, and
• unemployment benefits.

When companies misclassify workers as independent contractors, they are likely depriving these workers of the various benefits they are entitled to under the law. This can lead to claims for unpaid wages and penalties.

Whether a worker is an employee or an independent contractor is relevant in many contexts, and each government agency uses a slightly different analysis. For more information, see Independent Contractor or Employee: How Government Agencies Make the Call.

Assembly Bill 5 and the "ABC Test" for Independent Contractor Status

The independent contractor classification is particularly relevant to California's wage and hour laws, which provide a number of rights and benefits to employees but not independent contractors. Historically, California used the flexible, multi-factored Borello test to determine whether a worker is an employee for purposes of California wage orders. However, in 2018, the California Supreme Court rejected this test in favor of a more restrictive three-prong test called the "ABC" test. Dynamex Operations W., Inc. v. Super. Ct., No. S222732 (Cal. Apr. 30, 2018).

Assembly Bill 5 requires employers to satisfy all three prongs of the ABC test to classify a worker as a contractor:

• The worker is free from the control and direction of the company in connection with performing the work, both in reality and under the terms of the relevant contract.
• The worker performs work that is outside the usual course of the company's business.
• The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work being performed for the company.

Uber and other rideshare companies will face an uphill battle to meet these requirements. In particular, drivers will have a strong argument that their services are central to Uber's business—providing transportation to consumers—and that they aren't engaged in an independent occupation.

Seek Legal Assistance

If you work for a ridesharing company or work as a freelancer and believe that you have been misclassified, you might be entitled to minimum wage, overtime, penalties, and more.

To find out your options, speak to an experienced California employment lawyer today.