Mark Roman | April 26, 2016 | news
When is a driver an employee, and when is a driver just a contractor? This question is at the heart of a class action filed against Uber, the popular ride-sharing service. Uber recently agreed to pay about $100 million to settle lawsuits in California and Massachusetts. Those suits claimed Uber was improperly calling its drivers “contractors” rather than “employees” to avoid various liabilities and expenses. It is now facing a lawsuit in Florida based on the same argument.
Uber claims it just provides an app which puts drivers in touch with people who needs rides. By calling itself a technology company, it avoids paying unemployment benefits, workers compensation benefits, and many other expenses for its drivers.
However, recent court rulings make Uber’s reading of our labor laws highly questionable. FedEx tried to claim its drivers were independent contractors until recently, but it wound up paying millions to settle their claims. Workers won similar claims against Starbucks, airlines, cleaning companies, and even strip clubs. In those cases, courts found that workers were too tightly controlled and directed to be considered mere contractors.
Corporate employers and labor lawyers have paid close attention to these developments because of the implications for payment of expenses and benefits. However, the contractor/employer issue matters for personal injury and death cases too.
Most people understand that an employer is liable for wrongful acts by its employees. For example, Pepsi is liable if one of its employees causes a traffic accident while driving a Pepsi truck. However, a corporate master is generally not responsible for civil wrongs caused by an independent contractor. The independent contractor defense gives the corporation a defense to liability whenever a true contractor is involved.
Thus, the outcome of cases involving Uber and other “sharing economy” actors is not just important to labor and employment law. It’s important for everyone who’s involved in auto accidents, gets hurt at a job site, or is accidentally injured by a skycap dropping luggage at the airport. The ability to recover for serious injuries and other wrongs can rest on the employer/contractor distinction.
While employers generally buy insurance to cover the negligent acts of their employees, they do not buy insurance to cover independent contractors. Independent contractors themselves may forego insurance and just “go bare” in their business activities. This is particularly true for people of modest means – like Uber drivers. In an economy where an estimated 21 million people work as independent contractors, the implications of this are huge.
As the old saying goes, if it walks like a duck and quacks like a duck, it’s probably a duck. No employer should gain a competitive advantage by calling employees something they’re not. It matters not just for the employees themselves, but for accident victims too.
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