Employees vs. Independent Contractor?
What’s going on with Uber and the grief it’s getting on the west coast about drivers really being employees?
In June 2015, the California Labor Commission ruled that a San Francisco Uber driver is a company employee, not a contractor. In that decision, the Commission awarded the Uber driver $4,152.20 in employee expenses, including mileage reimbursements, toll charges and interest. The problem here is that the foundation of Uber’s business model is that all of its drivers are independent contractors, rather than employees. As such, Uber does not have to pay minimum wage, overtime, unemployment insurance, driver expenses, and taxes.
Uber’s argument is that it is just a “technological platform” for private vehicle drivers to facilitate private transactions, that drivers are independent contractors, that Uber has no control over the hours drivers work. The issue with independent contractors continues to be a hot topic of debate as employers rather classify them in that way rather than employees. However, federal wage and hour law has strict guidelines as to whether your independent contractor is truly independent.
What does it mean to misclassify your employees?
Employer misclassification of their employees as independent contractors is a widespread issue and one that the Department of Labor is looking at closely. The IRS estimates that employers have misclassified millions of workers nationally as independent contractors. While some employers misclassify their workers as independent contractors in error, often employers misclassify their employees intentionally in order to reduce labor costs and avoid paying state and federal taxes. If done to avoid paying taxes or reducing payroll, it can mean high penalties for the employer.
An independent contractor provides a good or service to another individual or business, often under the terms of an agreement that dictates the work outcome, but the contractor retains control over how they provide the good or service. The independent contractor is not subject to the employer’s control or guidance except as designated in a mutually binding agreement. The contract for a specific job usually describes its expected outcome. Essentially, independent contractors treat their employers more like customers or clients, often have multiple clients, and are self-employed.
