Why Are Companies Misclassifying Workers as Independent Contractors?

With recent news of Uber agreeing to an $84 million settlement to end two federal class-action lawsuits, people may be curious about independent contractors and employment law. Many people assume Uber and other companies are misclassifying workers as independent contractors.

As independent contractors, ridesharing drivers should have total autonomy. For example, Uber drivers have autonomy over who they pick up and when they work.

However, Uber drivers lack autonomy in many ways. Uber sets fares for rides and closely monitors driver ratings. Drivers can still be fired for low ratings from users. What we are trying to say, is that some workers labeled as ‘independent contractors’ lack autonomy, making them more like employees. Why does this difference matter?

Independent contractors lack many of the basic protections afforded to employees, such as workers’ compensation, minimum wage, health care or unemployment insurance. In addition, independent contractors are not reimbursed for work-related costs (such as gasoline or vehicle repairs). Some independent contractors may receive negative paychecks!

Why would companies engage in such trickery? Companies are misclassifying workers as independent contractors so they do not have to provide benefits or be held liable for the actions of workers.

In other words, it is an unethical way for companies to save money.

How California Defines Independent Contractors

Uber settled with 385,000 drivers, meaning the issue of defining its drivers as employees or independent contractors has yet to be resolved. The big question is whether federal courts will weigh in on this issue again during future lawsuits or whether the judge will reject the settlement. As of last week, Uber is facing another set of lawsuits in other states, so only time will tell.

Fortunately, the California Labor Commission has defended misclassified Uber drivers in the past (although its decision is only an administrative one, meaning it affects individual drivers, not groups of drivers like in a class action lawsuit). Most recently, the California Labor Commission ruled an Uber driver was entitled to unemployment benefits. Individual Uber drivers can still file complaints with the California Labor Commission.

The Los Angeles labor law attorneys at Kesluk, Silverstein, Jacob & Morrison, P.C. can help victims of wage theft and workplace discrimination.

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