Considerations Before Classifying an Employee as an Independent Contractor

In a recent decision, the California Labor Commissioner decided that an Uber driver was in fact an employee and not an independent contractor as previously classified.  Uber argued that drivers have complete flexibility and control, they can decide their hours and choose to earn income from multiple sources.  Uber held itself out to be a mere conduit to connect passengers and drivers, however, the Labor Commissioner ultimately found that Uber was “involved in every aspect of the operation.”

In order to be an Uber driver, Uber requires prospective drivers provide their personal banking and residence information.  Drivers must pass background and DMV checks. Uber control the tools the drivers use by requiring drivers to maintain a company approved vehicle, “that is no more than ten years old and shall be in good condition.” Furthermore, Uber set rates and pay drivers a non-negotiable service fee.   As such, the Labor Commissioner found that the Uber driver was an employee and therefore responsible for all business expenses which may include vehicles, gasoline, overtime wages, workers’ compensation and payroll taxes.

To determine if a worker is an independent contractor, the California Supreme Court in S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations (1989) 48 Cal. 3d 341 has established the following factors for consideration:

1.      Is the independent contractor performing services engaged in an occupation or business distinct from that of the principal?

2.      Is the work part of the regular business of the principal?

3.      Does the independent contractor supply the instrumentalities, tools and the place to perform work?

4.      Must the independent contractor invest in his own equipment or materials?

5.      Does the work require a special skill?

6.      Does the independent contractor require direction or supervision?

7.      Does the independent contractor’s opportunity for profit or loss depend on his managerial skill?

8.      Does the work require a certain amount of time?

9.      Is the principal’s relationship with the independent contractor temporary or permanent?

10.  Is the independent contractor paid by time or by the job?

Classifying workers as independent contractors is a tricky legal analysis.  If your “independent contractor” looks anything like an employee, chances of misclassification are high and potential damages may include but are not limited to minimum wage, overtime pay, reimbursement of expenses, waiting time penalties, and liquidated damages.


Read more about the decision here.

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