Rideshare Uber/Lyft Employees – Are They A Contractor or Employee In California?

July 15, 2020

Employment laws changed in 2020. Some of the changes included additions to breastfeeding laws. One that’s a little more complex involves contract employees. In 2019, California’s Assembly Bill 5 was signed into law and became effective in 2020. Using the “ABC Test,” employees have to determine if their workers are truly contractors or if they’re employees. Where do rideshare drivers fall into this new rule? Are they contractors or are they employees?

The Employee vs. Contractor Criteria

The ABC Test looks at these three criteria. If all three are met, the worker is, in fact, a contractor. If not, the worker is an employee.

  1. The worker is free of control and direction of the employer in terms of work performance.
  2. The worker works outside of the employer’s office or place of employment
  3. The worker is in an established occupation, trade, or business that’s in the same field as the employer.

Some jobs don’t fit into those three criteria. If that’s the case, attention turns to the Borello test. The questions that help determine if the worker is an employee or contractor are:

  • Does the worker or the employer supply the equipment and supplies in order to do the job?
  • Does the worker hire additional employees to complete the work?
  • Is the worker paid per hour or job?
  • How long are the services required?
  • Does the employer have the right to fire the worker or would that be a breach of contract?
  • What type of work is being done?
  • Does the worker make money based on his or her ability to manage time and get work done as promised?

There is a question as to whether Uber and Lyft drivers are employees or contractors. In answering many of those questions, it appears that they are employees of companies like Lyft and Uber, but federal and state laws conflict a little.

What Does the Law Say?

Back in 2019, the National Labor Relations Board released a statement saying that since drivers work when they want, use their own cars, and can work for other rideshare companies, the workers are employees. While drivers do work when they want, many do not receive a fair wage. To be competitive, some drivers work for less than the federal minimum wage and that’s a problem.

The California Public Utilities Commission ruled that “ride-hailing” drivers for companies like DoorDash, Lyft, and Uber should be categorized as employees. The June announcement changes things for drivers as they now qualify for overtime pay. Several gig economy companies, including Lyft and Uber, worked on a ballot measure in the November election that will exclude any employer with app-based drivers from Assembly Bill 5 if voters are in favor of the ballot measure.

Why Does It Matter?

What’s the value of being an employee versus a contractor? One of the biggest downfalls to being a contractor is that if you lose your work for some reason, you don’t qualify for unemployment benefits. This was lifted during the COVID-19 pandemic, but most gig employees never receive unemployment. They have to pay for private temporary disability policies, which eats into the money gig employees make as contractors.

If you are an employee of a company, you get benefits like personal days and sick time. You receive other benefits like employer-sponsored healthcare and overtime pay. Your employer deducts taxes from your paycheck. You also have protection under employment laws like discrimination and sexual harassment. As employees, workers are also protected by wage laws and cannot work for less than California’s minimum wage.

Common Violations Gig Economy Workers Face

If a driver is told they must be available between 5 p.m. and midnight on holidays, the worker is under the employer’s control. That worker is not a contractor and should be getting benefits and on the payroll with taxes taken out. If a worker is required to attend weekly meetings at the office or lose his/her job, that worker could also be considered an employee.

In 2015, Instacart was sued by workers who felt they were incorrectly classified as contractors over part-time employees. A settlement for close to $5 million was reached. With changes to the laws, it’s expected that others will be taking a look at the hours they work and rules they follow and question their employment status.

One settlement raises a good point regarding rideshare drivers. Lyft was sued for violations of the Americans With Disabilities Act and ended up agreeing to a settlement. Why? Drivers were not helping passengers or accepting ride requests from those who use a walker or a wheelchair. Lyft had to change its wheelchair policy and make sure drivers are following that rule. While it’s an understandable change, it also means that Lyft now has to direct the driver’s work performance.

While the law protects gig economy workers, there are still employees that do not follow the rules. Others may not be aware that with the law change, they should assume their contractors are employees and run through the criteria to prove otherwise. Employers had to start meeting their payroll tax obligations as soon as the law went into effect. Some contractors still get paid as contractors and are paying their own taxes, which is wrong.

AB 5 went into effect on January 1, 2020, and has proven challenging to some gig workers. There are so many rules to follow, so not everyone understands it. Even if a worker is truly an employee, the worker may never speak up out of fear of losing work or being penalized for saying something.

The law does state that you are allowed to ask to be classified. To do so, file a claim with the Labor Commissioner or seek a lawyer’s advice. You should do the same if you are discriminated against or are being retaliated against. If you work in California and question if you’re more of a worker than a contractor, you should talk to a lawyer. It’s free. You may find yourself needing to file a lawsuit, so you’ve saved time as you’ve already researched experienced employment law attorneys.

Whatever you do as a gig worker, whether you pick up and drive passengers from point A to point B or deliver packages, food, or groceries, make sure you’re treated fairly. You could be getting protections under this law that you’re unaware of that are important if you find yourself out of work. It’s important to talk to Shegerian Conniff to find out what your rights are and seek fair treatment if an employer is in violation.