Employee Vs. Independent Contractor: Why Employment Designations Matter

By now, many Los Angeles area residents have likely heard about and may have even used the rideshare service known as Uber. Founded in 2009, today the San Francisco-based rideshare service company can be found in “hundreds of cities” across the U.S. Through an app-based system, individuals in need of transportation can summon an Uber driver who uses his or her own vehicle to transport a customer to his or her desired location.

While the premise behind Uber is fairly ingenious, questions and concerns have been raised about how Uber drivers are classified and compensated. For example, while the company contends that Uber drivers are independent contractors, the company also directly controls numerous aspects of how drivers complete their work assignments and also routinely fires drivers who fail to abide by the company’s rules.

By classifying drivers as independent contractors, Uber is able to avoid providing drivers with any type of benefits. Additionally, Uber drivers have no protections with regard to wages, discrimination and work-related safety issues. Designating drivers as independent contractors also means that Uber is not required to pay taxes related to workers’ compensation, unemployment and Social Security.

An increase in rideshare companies and other business models that rely upon sharing services has lead to an increase in the number of independent contractors in the U.S. and, in many cases, these workers are paid low wages and work more than 40 hours per week. Allowing companies to classify these types of workers as independent contractors also allows them to circumvent important employment and labor laws that provide workers protections with regard to wages, overtime hours, safety and discrimination.

Source: Los Angeles Times, “Is your Uber driver an independent contractor or an employee? It makes a difference,” Eric Risberg, June 7, 2015

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