Nowadays, on-demand rides, groceries, hot meals, flowers, house cleaning, and other errands are just a click away. New tech startups have generated a growing “1099 workforce,” enticed with the prospect of flexibility instead of the confines of a 9-to-5 work week.
Companies providing these on-demand services have long claimed to not be delivery services at all, but instead claim to simply supply a software platform for customers to connect with an independent service provider. Uber, for instance, has consistently claimed to be a technology company that devised an app that connect “black car” or “livery drivers” with passengers in exchange for a percentage of the fare. This is certainly a 21st Century perspective – one not easily reconciled with 20th Century legislation.
Recently, two separate Federal judges in San Francisco allowed two pending lawsuits against car service tech startup giants, Lyft and Uber, to proceed to trial, alleging the companies misclassified workers as independent contractors to avoid reimbursing for employee expenses. Separately, last Thursday, the same lawyer who filed the Uber and Lyft actions filed suit in federal court in San Francisco against food delivery startup Caviar, delivery startup Postmates and cleaning service company Homejoy.
For now, the Uber and Lyft drivers claim to be owed money for gas, insurance and vehicle maintenance. Yet recognition of drivers, who pick and choose when to turn on the app and whether or not to pick up passengers, as employees is a slippery slope to demanding other standard employee benefits like disability, health care, retirement plans, workers’ compensation and unemployment insurance, not to mention minimum wage and overtime. It will likely now be up to a jury to determine whether those companies exercise the little direction or control over their drivers to properly classify them as independent contractors – a determination that is highly fact-specific. Courts take into account factors like the nature and degree of an “employer’s” control, which party has the right to terminate the relationship, and whether the worker uses their own equipment, advertises independently, or operates a separate business.
Whether to depend on an on-demand workforce is rarely a black and white analysis, but instead a judgment call on risk. While we wait on the outcome of these cases, which will likely have wide-ranging ramifications, employers engaging independent contractors should review their services and the level of control they exercise over those services to ensure all employees and contractors are correctly classified.