As a general rule, if you're out of work through no fault of your own, you may qualify for unemployment benefits—if you were an employee. But Uber and Lyft classify their drivers as independent contractors, who aren't legally entitled to these benefits (or a host of other labor protections).
Does this mean you can never get unemployment benefits if you drive for Uber or Lyft? Not necessarily. Here's what to consider if you're a gig worker who's lost your job with Uber or Lyft.
Employees are entitled to many workplace protections that independent contractors are not, including wage and hour protection, workers' compensation coverage, unemployment benefits, and protection against discrimination and harassment (although some state laws protect independent contractors, too).
It's generally much more expensive for employers to classify workers as employees than as independent contractors because doing so requires employers to pay taxes for things like Social Security, Medicare, and unemployment insurance, as well as comply with a broad range of labor laws. Some employers misclassify workers as independent contractors to save money on taxes, avoid paying minimum wage or overtime, or bypass other state laws protecting workers.
Uber and Lyft classify their drivers as independent contractors. But that doesn't necessarily mean they are independent contractors. That's because whether a worker is considered an employee or an independent contractor depends on the nature of their relationship with their employer, not on what their employer calls them. And the determination of whether a worker is an employee or an independent contractor is ultimately made by courts and government agencies, rather than by individual employers.
While different courts and agencies use different legal "tests" to determine whether workers are employees or independent contractors, most look at factors such as how economically dependent workers are on their employer and the degree to which the employer controls its workers' activities.
Workers are more likely to be considered independent contractors when they're in business for themselves, deciding which jobs to take, how much to charge, and when and how to do the work. Workers are more likely to be considered employees when they're economically dependent on their employer and the employer has the right to control their work.
For years, there have been legal disputes about whether drivers for ride-hailing apps are employees or independent contractors. Some drivers have sued Uber and Lyft, contending that these companies misclassified workers as independent contractors when they're actually employees. In addition, some state legislatures have passed laws requiring that Uber and Lyft treat their drivers as employees, and other states have demanded that these companies pay back taxes for misclassifying their drivers.
Uber and Lyft have fought all of these attempts to classify their drivers as employees. They've largely been successful, which means they continue to treat drivers as independent contractors not entitled to most employee benefits (with a few notable exceptions, discussed below). These legal battles are ongoing in many states.
California provides one example of how these disputes play out. In 2019, the California Legislature passed a law that changed the rules for who's considered an employee and who's considered an independent contractor. Under that law, Uber and Lyft drivers would have been considered employees entitled to all the accompanying benefits.
Companies like Uber, Lyft, and DoorDash then spent $200 million on a campaign to pass a ballot proposition that would exempt them from the new law; the proposition passed in 2020. Drivers and their labor union then sued, arguing that the proposition was illegal. A state trial court agreed, the ride-hailing and delivery companies appealed, and in 2023, an appellate court ruled that the companies can continue to treat their drivers as independent contractors.
As a result, despite a lengthy legal battle, very little has changed for Uber and Lyft drivers in California, who still aren't entitled to many labor law protections and benefits.
There are only a few places where you might be entitled to unemployment benefits as an Uber or Lyft driver. However, as the law in this area is constantly in flux, this could change quickly.
For example, in 2021, a court in upstate New York found that Uber exercised sufficient control over its drivers for them to qualify as employees, making Uber responsible for unemployment insurance contributions with respect to the drivers at issue in the case. The court noted that its decision applied only to the upstate New York market. The decision was also limited to unemployment insurance and did not address any other employee benefits.
In 2023, Washington became the first state to establish unemployment benefits and family and medical leave benefits for Uber and Lyft drivers. However, Uber and Lyft drivers are still considered independent contractors in Washington State. The law granting them the right to certain benefits was the result of negotiations between lawmakers, labor leaders, and the ride-hailing companies, in which it was agreed that drivers would be entitled to certain benefits while maintaining their status as independent contractors.
While other states have successfully argued that Uber and Lyft misclassified their drivers as independent contractors, this hasn't translated into employee benefits eligibility for most drivers in these states.
For example, in 2022 Uber agreed to pay New Jersey $100 million in back taxes after the state claimed the company had misclassified its drivers as independent contractors. The payment was intended to cover benefits such as unemployment, temporary disability, and family leave insurance.
However, the payment was a settlement of New Jersey's claim covering the past four years, and it didn't affect whether Uber would owe taxes or be required to treat its drivers as employees in the future. Uber did not agree to reclassify its New Jersey drivers as employees as part of the settlement.
Similarly, a Massachusetts court held in 2022 that a ballot measure classifying gig drivers as independent contractors violated state law. But that decision related only to the legality of the proposed ballot measure (which would have codified into law the way ride-hailing companies were already treating their drivers), and didn't affect whether Uber and Lyft could continue to treat their workers as independent contractors.
If you worked for Uber or Lyft and believe you're entitled to unemployment benefits, contact an experienced employment lawyer. An employment lawyer can help you determine whether you've been misclassified as an independent contractor or are otherwise entitled to benefits.
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