The law surrounding Uber and other rideshare drivers can be complicated. Here’s what you need to know about Uber drivers and whether they are employees or independent contractors.
Since the beginning of Uber, the question of if Uber drivers were considered employees or independent contractors has been floating around. Both options have both benefits and negatives for both the company itself and for its drivers. While Uber drivers are technically considered independent contractors, the real answer is a bit more complicated than that.
What’s the Difference Between Employees and Independent Contractors?
Before one can fully understand the current situation of Uber drivers in the United States, one must understand the difference between employees and independent contractors. An employee is someone who works according to the directions given by an employer, with a limited amount of freedom on the employee’s part. An independent contractor often does not work for a single employer, but rather is free to offer their services to anyone. On top of that, independent contractors are not being supervised by their superiors, and they work according to their own schedules.
Here is a breakdown of some key differences between employees and independent contractors:
Employees
- Earn at least the minimum wage (currently it’s $7.25, though, in around half of the states, the minimum wage is higher)
- Get paid more for overtime
- Often receive paid time off
- Might receive employment benefits
- Are free to join a union
Independent contractors
- Can work for different companies at the same time (even for competitors)
- Have to use their own tools and resources (e.g., cars, laptops, etc.)
- Cannot join a union
- Have to pay higher taxes
- No paid time off
Are Uber Drivers Independent Contractors or Employees in California?
Throughout the years, Uber has gone through a lot of legal battles as well as promotion of legislation to avoid treating their workers as employees. While Uber drivers are treated like independent contractors in the United States, the issue is not as clear-cut as one might think. In 2019, the California AB 5 Bill codified and expanded upon an ABC test to differentiate between the employees and independent contractors. Workers are deemed to be independent contractors if:
- They are not being controlled or supervised by the hiring entity,
- They don’t perform work that is essential to the business, AND
- They can run their own business that would offer similar services to those specified in the contract or work for the competitors
Now from this list, it appears that Uber drivers would not be considered independent contractors under the AB 5 Bill. However, Uber drivers in California still do not have employee status.
Related: Uber Independent Contractor Lawsuits in California
Uber Driver Rights in California
The California AB 5 Bill was met with fierce opposition from ride-hailing companies, such as Uber and Lyft, as according to the new law, they would have to raise their wages and provide sick leave, among other employee benefits. Their initial lobbying efforts against the bill were unsuccessful, just like their later attempts to change the bill so that ride-sharing companies would be exempted from having to follow the new law. However, Uber, alongside Lyft, DoorDash, Instacart, and Postmates, were heavily involved in funding a ballot proposition, known as Proposition 22. If it were to pass, the drivers would retain their status of independent contractors, though the ride-hailing companies would have to:
- Slightly increase their wages
- Provide health insurance to drivers who drive on average for more than 15 hours per week
- Provide compensation for the lost income of the drivers if it was a result of the injuries sustained during their work
- Provide additional training and actively prevent discrimination in the workplace
Uber and the other companies pushed for Proposition 22 instead of the AB 5 Bill because they claimed the latter would be bad for both the customers and the drivers themselves. The fares for the rides would have to be increased by 25% to 111%, depending on the area, and the company would have to fire around 80% of the drivers. Proposition 22 would not only keep fares lower for customers and allow many Uber drivers to keep their jobs, but it also greatly increased the rights that many Uber drivers were originally lacking. Proposition 22 would allow Uber drivers to gain significant benefits and bring drivers one step closer to relying on Uber as a steady income. Proposition 22 passed with almost 59% of the votes, and as a result, the Uber drivers are treated as independent contractors.
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