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. In California, a recent decision by the state Supreme Court will make it harder for Uber to treat its drivers as independent contractors moving forward.
Before getting into the California decision, 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 a company misclassifies a worker as an independent contractor, 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).
To classify a worker as an independent contractor, the ABC test puts the burden on the employer to show that all of the following are true:
In May 2019, the U.S. Court of Appeals for the Ninth Circuit held that the Dynamex holding is retroactive, opening the door to many claims of past misclassification. (Gerardo Vazquez et al v. Jan-Pro Franchising International, Inc, No. 17-16096.)
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.
However, the California Supreme Court’s ruling is limited to California wage orders. Other agencies might take a different view when it comes to whether drivers qualify as employees for tax purposes, unemployment benefits, or workers’ compensation coverage.
If you work for a ridesharing company 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.