Are gig-economy workers contractors or employees? The California Supreme Court just issued a ruling that may answer that question, and could potentially put gig-economy-based companies like Uber, Lyft and Postmates on the hook for legally-required – and expensive – employee benefits.
Is an Uber driver an employee of Uber or an independent contractor taking on a job for Uber? The answer to that question has huge impact on whether gig-economy workers are entitled to the rights of employees. Those rights can include minimum wage, overtime pay, workers’ compensation, unemployment insurance, paid sick leave, rest breaks, and more.
Is an Uber driver an employee of Uber or an independent contractor working for Uber? The answer has huge impact on whether gig-economy workers are entitled to rights like overtime pay, workers' compensation, paid sick leave and more.
Examples of gig-economy jobs include drivers for Uber and Lyft, delivery drivers for food apps like Postmates and Doordash, and all kinds of independent contractors and short-term workers in countless industries.
The appeal for those who employ gig-economy workers – as, again, is the business model for Uber, Lyft, etc. – is that they don’t have to provide the often-expensive benefits and rights to gig-workers that they would to employees.
The appeal for workers in the gig-economy includes incredible flexibility and control over work-life balance. But some gig-workers find themselves slaving away in low-wage jobs with little-to-no control over their day-to-day work for companies that don’t provide them with benefits. At least, so far.
On Monday, April 20, 2018, the California Supreme Court issued a ruling that could put the brakes on the exploding gig-economy business model.
According to engadget:
“In a case against package and document delivery company Dynamex Operations West, the court has ruled in favor of the plaintiffs – drivers seeking employment status who sued the company way back in 2005. According to the state’s highest court, companies that want to classify their workers as independent contractors have to prove that those workers are running their own business.”
Says The New York Times of the decision, it “could eventually require companies like Uber…to follow minimum-wage and overtime laws and to pay workers’ compensation and unemployment insurance and payroll taxes.”
According to the Times, “…classifying drivers and other gig workers as employees tends to cost 20 to 30 percent more than classifying them as contractors.”
Should the court’s decision become law, online labor platforms – like Uber and Postmates – would have to change their business model, potentially turning their contract workers into employees – with accompanying rights and benefits – or allowing them to set their own prices and terms.
This change would likely eat into any affected company’s bottom line, but it’s as yet unknown how these changes would impact service costs for their customers.
According to CNN, “Labor advocates hailed the decision, saying that workers who claim they are misclassified as independent contractors have a much better case under the new standard.”
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