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"Technology Companies" Uber and Lyft Facing Workers’ Compensation Challenges

"Technology Companies" Uber and Lyft Facing Workers’ Compensation Challenges

Uber and Lyft face a lawsuit for not paying benefits to drivers. Learn the difference between employees and contractors to avoid worker misclassifications.

Tuesday, February 17, 2015/Categories: hiring-and-human-resources

It's no secret that the economy has shifted over the last 15 years and companies are relying more on independent contractors, allowing them to maintain a flexible workforce of non-employees.

As an IT consultant, you've probably been hired as an independent contractor by a number of companies who need temporary IT work. Contractors differ from employees because they…

  • Aren’t entitled to the same benefits.
  • Don't receive the same direction from their employers.

A new California lawsuit shows how difficult it can be to draw a distinction between contractor and employee. According to a report by Reuters, Lyft and Uber, the two biggest rideshare companies, are being sued by drivers who argue they should be considered employees. The drivers claim they are owed unpaid benefits and should be reimbursed for some of their gas and driving expenses.

What does this lawsuit have to do with tech contractors? That's a great question. The lawsuit hinges on whether or not tech companies that connect consumers and service providers owe any benefits to the contractors that provide services to their customers. It's a complex issue, but it could affect your liabilities as a mobile developer, so let's take a closer look.

Employee or Contractor: A Dizzying Dispute

When you hire an Uber or ping a Lyft driver, the mobile app connects you to an independent contractor – your driver – who will take you where you need to go. But what has to happen before the driver is allowed to work for Uber?

In the lawsuit, drivers explain that Uber and Lyft…

  • Require background checks.
  • Can hire or fire drivers.
  • Require them to accept a minimum percentage of ride requests.

From a driver's perspective, Uber and Lyft place certain demands on them, blurring the line between contractor and employee – a line that is often disputed in court.

In recent years, there have been high-profile lawsuits about cable and internet installation contractors, FedEx drivers, and even exotic dancers, all of whom successfully argued that the company that contracted them treated them like employees and owed them unpaid overtime and benefits.

What the Lyft and Uber Lawsuits Mean for Tech Contractors

If Lyft and Uber lose this lawsuit, the decision could impact all kinds of tech companies that connect consumers and service providers. Think about the bevvy of mobile app companies that connect people with errand-runners, house cleaners, repairmen, and other professionals. All these mobile apps could be affected.

If you're a mobile developer working on a platform that connects customers to a service provider, this ruling could mean that you're liable for a multitude of benefits for contractors, including…

Even if you're not a mobile developer, it's important to understand the difference between contractors and employees. Let's review the important work classification distinction between employees and contractors.

Employee or Contractor: What's Best for Your Small Business?

What's the difference between independent contractors and employees?

An independent contractor should be able to…

  • Control the manner of their work.
  • Use their own tools and equipment to complete their work.
  • Have the ability to earn a living by working for other businesses.
  • Set their work hours.

Contractors offer simplicity and typically cost less, while employees provide predictable results and the benefit of always being around to contribute to new projects. If you're planning on hiring someone for long-term work, it may make sense to hire an employee. However, you should be aware that you'll have to pay additional taxes and benefits.

If you have any questions about the legality of your employment practices, seek guidance from a legal professional, contact the IRS, and consult your state's guidelines. To get started, check out the Internal Revenue Service’s 20 factor checklist [PDF] for help determining worker classification.


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