The “gig economy,” also known as the “sharing economy,” has made significant changes to many aspects of the job market. Many of those changes are good. For example, a person who drives for a rideshare company like Uber or Lyft can enjoy a measure of flexibility not found in the traditional workplace. They can decide when to work and for how long.
One downside, however, is that employment laws only protect employees, not independent contractors. Because most ridesharing services consider their drivers to be independent contractors, those workers usually aren't entitled to the minimum wage, overtime pay, or other employment protections.
In recent years, the rideshare company Uber has been in the news because of legal disputes with drivers who argue that they should be considered employees, not independent contractors.
Employee vs. Independent Contractor
The legal definitions of "employee" and "independent contractor" vary from one state to the next, so a contractor in one state might be an employee somewhere else.
If Uber drivers are employees, Uber would have certain responsibilities to them under federal and state employment laws. These include laws that address issues like the minimum wage, overtime compensation, employment discrimination, sexual harassment, and the right to unionize.
If Uber drivers are independent contractors, as Uber generally contends, then the only law that would apply would be the law of contracts. The company’s responsibilities are limited to the terms of the contracts with each driver.
The main issue in determining whether someone is an employee or an independent contractor is the amount of control that the employer can exercise over the person in the course of the job.
If an employer can direct the person to be in a particular place for a particular period of time, such as at their desk in the employer’s office from 9 a.m. to 5 p.m., that would probably weigh in favor of the person being an employee.
If the individual works on their own schedule, without direct supervision from the employer, that might look more like an independent contractor situation.
Here is a rundown of the most recent legal developments in this area, though these rulings are hardly the last word on this topic.
Prop. 22 in California
In 2020, California voters passed Prop. 22, the most expensive ballot measure in state history. Backed by Uber, Lyft, DoorDash, and Instacart, Prop. 22 granted rideshare companies an exemption from Assembly Bill 5, a 2019 law that made it much more difficult for companies to classify workers, including rideshare drivers, as independent contractors.
Opponents of Prop. 22 immediately challenged the law in court arguing that it was unconstitutional. A superior court judge agreed and struck down the law in August 2021, saying it violated the California State Legislature's authority to grant workers' compensation. Then, in March 2023, a California appeals court reversed the lower court's decision and ruled that Prop. 22 should remain state law. In June 2023, the California Supreme Court confirmed, upholding Prop. 22. The ruling means that Uber and Lyft can continue to classify drivers as independent contractors.
National Labor Relations Board Decisions
The federal National Labor Relations Act (NLRA) protects the right of employees to organize for the purpose of collective bargaining, such as joining or forming a labor union. It prohibits employers from interfering with employees who are exercising these rights. The statute created the National Labor Relations Board (NLRB) to investigate claims of violations by employers, and to adjudicate alleged violations.
The NLRB’s general counsel issued a memorandum in April 2019 recommending the dismissal of three cases alleging NLRA violations by Uber. The memorandum concluded that the Uber drivers who filed the complaints were independent contractors, not employees, based on the “common-law agency test” that the NLRB adopted. This test consists of “ten nonexhaustive common-law factors.”
In June 2023, the NLRB reinstated rules that were changed in 2019. The change could allow rideshare drivers to form labor unions and negotiate with companies like Uber and Lyft on issues like wages and working conditions, regardless of whether they are classified as employees or independent contractors.
Contact an Attorney
If you perform work in the gig economy, particularly in California, your employer might be misclassifying you as an independent contractor. If that's the case, you might be entitled to greater legal protections and higher wages. Because the employee versus independent contractor determination is made on a state-by-state basis, you should consider contacting an employment lawyer in your area to discuss your legal options.