The Department of Labor has actively gone after employers who misclassify workers as independent contractors rather than employees for several years now. Recently, Uber was the latest target by a former driver who claimed the drivers should be employees. The litigation resulted in a class action that involved over 385,000 drivers.
Uber announced a preliminary settlement to the tune of $100 million. Interesting though that Uber did not agree to the misclassification and the drivers will remain contractors. The settlement requires Uber to give drivers a warning before being removed, allow drivers to post signs for tips and create driver associations that will represent workers in management talks. Drivers are objecting to the settlement because they argue it does not make them employees. Many consider it a win for Uber because converting all the drivers to employees would greatly change their business model and possibly not make it sustainable.
Whether someone is an employee or independent contractor requires a careful analysis and misclassification can be costly. The DOL and IRS will presume the person is an employee, not a contractor to ensure that the worker is getting overtime when due as well as benefits and appropriate taxes are being paid.
There is no single test for determining if an individual is an independent contractor or an employee under the Fair Labor Standards Act. However, the following guidelines should be taken into account:
- The extent to which the services rendered are an integral part of the principal’s business
- The permanency of the relationship
- The amount of the alleged contractor’s investment in facilities and equipment
- The nature and degree of control by the principal
- The alleged contractor’s opportunities for profit and loss
- The amount of initiative, judgment, or foresight in open market competition with others that is required for the success of the claimed independent contractor
- The degree of independent business organization and operation
More information can be found at https://www.dol.gov/whd/workers/misclassification/ai-2015_1.htm
