Uber Faces Backlash Over Classifying Drivers As Contractors

Date: May 29, 2015

Ride-Share Service Targeted In Several Legal Cases

As ride-sharing services grow in popularity, they’ve faced growing criticism for their hiring practices. Both Uber and Lyft have argued that their drivers fall under the classification “independent contractors,” rather than “employees,” Business Insider notes. Employment rights attorney Shannon Liss-Riordan has been suing Uber and rival ride-sharing service in California for classifying its drivers as such, meaning the companies aren’t “responsible for things like payroll taxes, job expenses, anti-discrimination protections or overtime pay,” Insider notes. Commenting on the cases against Uber and Lyft, Liss-Riordan said, “I don’t believe this industry needs to be built on a system whereby the workers don’t need to receive any of the protections that we have a society that workers need to receive.” She argued that insuring its drivers, paying minimum wage and overtime, and reimbursing their expenses “is not going to put Uber out of business.”

The growing rise of the so-called “1099 economy”, where workers are flexible and fulfill duties the IRS classifies on its 1099 MISC form for freelancers and contractors, is at the heart of another Uber dispute in Florida, the Miami Herald reported. Last week, Florida’s Department of Economic Opportunity ruled that Cutler Bay, FL Uber contractor Darrin McGillis “was in fact an employee of Uber” while working for the company earlier this year, and thus could be eligible for unemployment benefits, citing a wrongful termination from Uber in April. McGillis is hoping that the ruling means he could be eligible to receive reimbursement for gas mileage and overtime worked as well. He’s just one of more than 10,000 so-called “driver-partners” to participate in Uber since its launch in Miami-Dade in June 2014. In total there have been 3 million Uber rides used in the area, creating $30 million in income for drivers.

What Happens Next

Uber has until June 9 to appeal Florida’s decision granting employee status to McGillis, and is expected to do so. Meanwhile, the fight is ongoing in the California suits against Uber and Lyft, which U.S. District Court ruled needed to go to jury trial. Facing a string of legal challenges in multiple states, for now ride-sharing services remain in a gray area under employment law, creating uncertainty for these small business startups.

What This Means For Small Businesses

Many small business owners rely on contractors and other independent, part-time workers to create and grow a successful company. Increased costs associated with having to classify some of these workers as full-time, and thus mandating benefits like sick leave or unemployment insurance, could create an undue burden on payroll and jeopardize the financial health of small businesses in Miami and across the country.

Additional Reading

The South Florida Sun Sentinel profiled some of the drivers who have worked for Uber in South Florida over the past year. NFIB has previously covered the burdensome regulations restricting ride-sharing services in Florida.

Related Content: Small Business News | Labor | Miami, FL

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