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.
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:
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.
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:
Uber and other ride sharing 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.
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.