In a major development impacting the gig economy, a state court judge in California rejected the argument from Uber and Lyft that their drivers were independent contractors. The court found that, under the ABC test, such drivers were actually employees.
California codified the ABC test, which is used to classify workers as either employees or independent contractors. Under this test, a worker is presumed to be an employee unless all of the following are met:
- The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
- The person performs work that is outside the usual course of the hiring entity’s business.
- The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
In California v. Uber Technologies, Inc., Uber and Lyft argued that they provided the platform for connecting drivers and riders, and not the rides themselves. The judge flatly rejected this argument, stating “”it’s this simple: defendants’ drivers do not perform work that is ‘outside the usual course’ of their businesses” as transportation network companies that “engage in the transportation of persons by motor vehicle for compensation.”
This case is significant, as a number of states also utilize the ABC test and may find the ruling persuasive. Other states, however, utilize a different test, a “right to control” test (which is also applied under the Fair Labor Standards Act), under which the employer/employee relationship exists when the employing entity has the right to control and direct the individual performing the services, not only as to the result to be accomplished by the work, but also as to the details and means by which that result is accomplished. Many factors are reviewed under the “right to control” test, none of which are individually determinative. It is less clear how these states will view the California court’s ruling.