Employee or Contractor? An In-Depth Look at Uber and Lyft

Craig Smalley
Photo courtesy of Craig Smalley
Craig W. Smalley, EA
Founder/CEO
CWSEAPA LLP
Columnist
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I’ve been following the class-action lawsuit by Uber drivers who are suing Uber Technologies Inc. over their perceived employee status, and are attempting to nail down an hourly wage and overtime. The main lawsuit was filed in California, but drivers in Florida, Illinois, and Massachusetts have also filed a similar, nationwide class-action lawsuit against the ride-sharing company.

Uber drivers say the San Francisco-based company violated the Fair Labor Standards Act and are seeking to recover unpaid overtime wages and work-related expenses. The lawsuit filed in the US District Court of the Northern District of Illinois goes a step further and tries to recover tips that were “earned but stolen by Uber, or were lost due to [Uber’s] communications and policies.”

I have an interest in this story because if these drivers are deemed employees, the next organization with its hands out will certainly be the IRS. 

As far as the IRS is concerned, an employee and employer relationship is entered when an employer exerts control over its employee. There are different tests that the IRS uses, but it all boils down to control. 

When I decided to write this article, I concluded that I would either have to interview drivers or become one myself. I ended up doing both.

I have a good friend, who I will call “Ryan” for this article, who drives for both Uber and Lyft. By day, he has a very successful job in the telecommunications industry, makes good money, and has great benefits. I didn’t understand why he drove for Uber and Lyft. 

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Jan 24th 2017 01:39

Nice article, Craig. Sorry to hear you got stuck with a jerk, bound to happen eventually if you drive long enough! I would have pulled over and kicked him out.

The control issue is a long shot IMO. Uber/Lyft are really just middlemen, so to speak. It's just a platform. Not much different from ebay, which brings buyers and sellers together and occasionally mediates disputes.

I don't think the fact that uber sets the rates is sufficient to constitute control.

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By Heather
Jan 24th 2017 04:32

I used to believe it was clearly a contractor relationship. However, after the firearm ban, they have now asserted their control and developed an employee relationship as they have taken away the driver's constitutional rights to defend themselves (as well as their passengers) if they chose to work for the company. This policy is effective with disregard for legally acquired concealed carry permits. "We have adopted a no-firearms policy to ensure people are safe and comfortable using Uber. We made this policy change after assessing our existing policies and reviewing recent feedback from both riders and drivers," an Uber representative wrote in an email to Newsweek.

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Jan 24th 2017 05:47

Thanks for the update, Heather. I was not aware of that. I would never drive for Uber with that restriction, and it is sad to see that Uber doesn't value the right to defend oneself. I guess that's to be expected from a company headquartered in San Francisco, though...

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to skinnyvinny
Jan 30th 2017 13:02

Honestly, I never felt unsafe. However, I didn't drive after the bars closed, and I stayed away from bad areas

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