The California Labor Commission recently ruled that an Uber driver from San Francisco is an employee of the Company and not an independent contractor because, although Uber did not control her schedule, she performed services integral to Uber’s business and Uber controlled other critical aspects of her job.
This distinction of employee vs. independent contractor is often influential on the financial success of a business because misclassifications can be remarkably expensive. This is because workers who are classified as employees are much more costly for businesses than workers who are classified as independent contractors. For example, businesses are required to pay minimum wage and overtime wages only to employees. Likewise, businesses are only required to pay employment taxes and secure workers compensation benefits for employees. And in California, businesses must cover all the business expenses of employees. Should a worker be misclassified, the employer must generally pay all the back wages, taxes, expenses and benefits that it failed to pay the complaining employee, and all those that are similarly situated. Indeed, there is already a class action lawsuit against Uber seeking unpaid expenses for all Uber drivers.
This month’s ruling serves as an important reminder for businesses to ensure their own workers are not improperly classified. To determine whether an individual is an independent contractor or an employee, courts and administrative agencies look to the degree of control that the business has over the individual in the performance of his or her job. The following factors are often at play:
• The extent to which the business directs and controls what work is to be performed, and how it is accomplished.
• Whether the business sets the worker’s work schedule.
• Whether the business pays for the worker’s tools and equipment needed to perform the job.
• Whether the business provides the worker with a place to perform his or her job.
• The extent to which the services performed by the worker are an integral part of the regular business of the company.
• The extent to which the worker makes his or her services available to the market by way of advertising and maintaining a visible business location.
• The manner in which the business pays the worker, whether it is by time spent on the job, or by job.
• Whether the worker has an opportunity to make a profit or incur a loss.
• Whether the business reimburses the worker for business-related expenses.
• Written contracts describing the type of classification that was intended by the parties.
• Whether the business provides the worker with employment benefits; and
• The permanency of the job.
The determination of whether a worker is an independent contractor or an employee depends on the specific circumstances of each worker. If you have any question about whether your workers are properly classified, please contact your favorite BurnsBarton attorney.
