How many times have you seen or read about a new start-up company and then immediately kicked yourself for not coming up with that idea first? That was the case for me when I first learned about Uber. Founded in 2009, this local San Francisco-based company has single handedly shifted the way we think about, and use, the car service industry. With a simply swipe and tap on your smartphone, Uber can help you catch a ride to anywhere, from anywhere, in the 40 countries that it now serve. This software platform also landed a $258 million investment from Google Ventures last year.
Uber is not, however, all this glitz and glam, especially within the realm of employment litigation. A complaint recently filed in the U.S. District Court in San Francisco claims that Uber misclassified its drivers as independent contractors when in reality, the drivers should be classifed as employees because they are told how to interact with customers, dress, and maintain their vehicles, what customer ratings to get, and if the rating is too low, Uber can "deactivate" or, essentially, fire the driver. We have to wait and see how the court comes down on this, but for now, we know that Justice Chen instructed that the complaint contained sufficient facts to make the existence of an employment relationship plausible on its face.
Whether or not a worker may be classified as an independent contractor or employee depends on several factors, the most important of which is the element of control. If the employer can exercise complete control over the way in which a worker completes a job (the how, when and where they do the work) that worker is an employee. Independent contractors, however, can control the way in which they do their work and the employer is only interested in the independent contractor's results.
Other factors in the classification determination include, but are not limited to:
Supervision - employees generally work under extensive supervision, while independent contractors generally work unsupervised.
How the work is done - employees have to follow instructions given to them by the employer about when, where, and how work is to be done, while independent contractors can set their own hours and do the job in their own way, the employer will only review the finished job.
Training - employees receive training from the employer on how to do a job a certain way, while independent contractors are not trained by the employer and can perform their work in any manner they see fit.
Integration - an employee's work is part of the day-to-day operation of the business and is coordinated with that of other people in the business and the success of the business depends upon that work being done, while an independent contractor's work is no an integral part of the employer's business and it is set apart from the work of the employees.
Who does the work - an employee has to do the work assigned and cannot hire someone else to do it, while an independent contractor can hire assistants to perform the work contracted by the employer.
Continuing relationship - employee works for the employer indefinitely, while the independent contractor is hired only to perform a certain job and once the job is complete, the contract expires.
Hours of work - the employer sets employees' hours, while independent contractors set their own hours.
Where work is done - employees usually have to work at the employer's office or a site designated by the employer, while independent contractors may work anywhere and usually supplies their own office and equipment.
Order of tasks - the employer can set the order in which an employee must do tasks, while independent contractor can choose what order they perform tasks necessary to complete the job.
Pay - employees are paid on set dates in regular amounts and their travel and business expenses are covered by the employer, while independent contractors are paid by the job and must pay their own expenses
Work supplies - employer provide its employees with tools and materials needed to complete the work, while independent contractors must supply their own tools.
Work for more than one company - employees usually only work for one employer, while independent contractors can work for several firms at the same time.
Worker's services available to the general public - employees' services generally are available only to the employer and not the general public, while independent contractors can make their services available to the general public and they often advertise their services and recruit new clients as they work for one employer.
Right of employer or worker to terminate the relationship at will - Employers may generally fire an employee, or an employee can generally quit, without cause or notice, while independent contractors must complete all work hired to do, unless a legal reason exists not to do so, and both the employer and independent contractor must complete what was promised.
Business distinct from employer - employees are part of the employer's business and do not offer their services separately from the employer, while an independent contractor have a separately established business form the employer, and promotes themselves to the general public as available to perform similar services.
Skill required - employees perform tasks that require little kill or expertise, while independent contractors often perform tasks involving high levels of skill or experience.
Belief of the worker and employer about the job - the fact that the worker or employer believes that an employer-employee relationship has been created will be taken into consideration in light of the circumstances under which such an understanding was formed, while the fact that a worker and employer believes that a principal-independent contractor relationship has been created will be taken in consideration in light of the circumstances under which such an understanding was formed.
The benefits that an employer may enjoy when classifying a worker as an independent contractor include: avoid liability for unemployment insurance, social security benefits, workers' compensation, state disability insurance, minimum wage and overtime requirements. These benefits, however, should not be an employer's motivation for classifying a worker as an independent contractor when in actually they should be classified as an employee.
An employee may bring a civil complaint, as exemplified by the Uber lawsuit, in court, or before the Labor Commissioner for unpaid wages and statutory penalties based on Labor Code violations.
At TONG LAW, we specialize in representing employees in misclassification cases. If you believe you have been misclassified by your employer, contact us today to discuss your potential claims.