Judges May Deflate Massive Opportunity By Declaring Uber, Lyft Drivers 'Employees' Rather Than Independent Contractors
from the this-won't-help-anyone dept
There are two big lawsuits that had hearings last week in California concerning how the car hailing (since some people get upset at the term "ride sharing") services Lyft and Uber operate. Both companies insist that what they provide is, in effect, a service marketplace, in which buyers (riders) and sellers (drivers) can connect (at preset prices) for rides. Under such a setup, the drivers have always been considered independent contractors who are using Lyft and Uber to find riders. Yet in both of these lawsuits drivers are trying to get themselves declared employees of the company, rather than independent contractors. So far, that argument seems to be winning as Judge Vincent Chhabria in the Lyft case on Thursday and Judge Edward Chen in the Uber case on Friday indicated that the drivers have a strong case.In the press, many have focused on the emails that were revealed in the Uber case (which Uber sought to block, claiming they were trade secrets), in which Uber employees gleefully and profanely discuss banning bad drivers. The drivers argue that this shows that Uber had the ability to terminate their employment, making them more like employees. But that doesn't make much sense, and if true, it could present problems for all sorts of online services. Plenty of sites, from eBay to Yelp to Twitter all involve outside users making use of their platform -- where the companies have the right to terminate their use of the platform, but that doesn't make the users "employees."
The IRS Guidelines on the difference between an independent contractor and an employee, under my reading, seem to clearly indicate these drivers are independent contractors. They set their own hours. They provide their own equipment. They decide how to go about completing the job.
This case, in many ways, reminds me of similar attempts to have independent users declared employees. Not too long ago, some Yelp reviewers sought to be declared employees. And, back in 1999, a bunch of AOL volunteer chat room monitors sued to be declared employees of AOL. AOL eventually paid up to settle that lawsuit, but all of these kinds of cases threaten internet platforms like these. When users of those platforms can suddenly demand to be called employees -- with all of the related salary and benefits associated with such, it creates tremendous liability for these platforms, and makes the entire internet, and the various services it provides less useful.
The drivers in these cases are relying on a recent precedent of FedEx drivers being declared employees, rather than independent contractors, but in that case, it actually makes more sense. The drivers are wearing FedEx uniforms, and often driving FedEx provided vehicles -- and even there, the rulings in FedEx cases across the country have been mixed (and the cases are still going).
There certainly are companies that try to game the system to name people as contractors rather than employees, but in this case, rulings against Lyft and Uber (no matter what you think of those two companies and their business practices) could result in some serious challenges for a number of really useful services that use the internet to enable great services to the public. One hopes, at the very least, that should these rulings go the wrong way, that the federal government and various state governments will, at the very least, update their rules for employee v. contractor classifications to make sure these services can survive.
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Filed Under: california, car hailing, employee, independent contractor, labor, ride sharing
Companies: lyft, uber
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http://www.huffingtonpost.com/robert-reich/the-sharethescraps-econom_b_6597992.html
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http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-S elf-Employed-or-Employee
Good luck supporting your conclusion based on your hatred and capitalization.
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That article is not even remotely convincing. It's also incredibly misleading.
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It's not that I doubt you but I would like to know your reasons.
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The smart, hard working, humans that do a good job at things that others can't do a good job at can demand more pay. Plumbers, electricians, computer repairmen, and independent contractors of all sorts that are good at what they do can charge more. Become better than everyone else at stuff, work hard, invest the time necessary to learn new things that people need and to adapt with the times, and charge a lot of money for it.
The real problem is trades change with time. How do you make all this money doing 50 different things and be able to put it in the bank without having a license for each and every one of them? Many people find ways around it by simply having one trade as a front and they'll funnel everything else they do through that trade (ie: I can be an independent car tower and when I fix someone's computer or do some other odd job I'll put cash in my bank account under my tow truck business) but, to some extent, you need to be careful not to get caught or else you may get penalized. To some extent this is a problem with our legal system. But the point is that if you work hard to be a fast learner and good at being able to adapt to whatever people want you can charge good money for your work. Or else they can go somewhere else, pay less, and have whomever they paid screw up the job badly and make things much worse. Their choice. Many people will choose to pay someone more to get the job done right and if you're that someone you can demand more or else ...
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Heck, even gardeners make good money. They charge, what, $60 to mow and trim (depending on how much work it is). There is work out there you just have to charge for it, do a good job, and be willing to work.
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If the taxi fare doesn't cover the cost of running the car, the insurance, wages for the driver, (employee), hourly rate (indepenent contractors' retirement fund, health fund, holiday fund, sickness fund, income & other taxes, and living wage), despatch service fee, then the driver is being ripped off. If the only way a driver makes a living wage is to skimp on health, holidays, retirement, and demand tax-breaks the problem is the fare is too low.
The dispatch services always get their pound of flesh, how else do drivers recieve fares
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The primary problem with Uber is that now taxi cab medallion holders must compete for drivers (so they must pay them more) and customers (so they must charge them less). The do nothing intermediates don't get to make as much. Corrupt politicians want kickbacks in exchange for forcing drivers to be taxi cab employees getting paid slave wages while giving the do nothing medallion holders the overwhelming majority of what the drivers worked hard for and issuing a limited amount of licenses so that medallion holders can charge way more. The fact of the matter is that Uber disrupts this corrupt business model and our corrupt legal system can't have that. Everyone must be a hard working low paid employee making money for a do nothing employer who charges monopoly prices for such services. The government can't let people go independent, how are politicians supposed to get kickbacks. That's the real issue here and anyone denying it is likely a corrupt liar. If you were honest your focus should be more on abolishing limited medallions and not on the fact that Uber has done a very good thing for consumers and drivers. It's the taxi drivers that do all the work, why should medallion holders get a cent (just because they offer politicians kickbacks). That's essentially legalized theft. It's an outrageously corrupt and unfair system and your focus should be more on abolishing this atrocity than on attacking Uber if you had any integrity.
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Uber has GPS. What, are you still stuck in the last century or something?
"then the driver is being ripped off."
The driver voluntarily chooses to use Uber because he sees it as better than his next best opportunity (ie: either being unemployed altogether or working harder for someone else at much lower pay). Who are you to decide for someone else what you think is best for them.
The reason the government wants to do anything it can to destroy these services is because it wants to force these drivers to go work much harder for someone else for much less pay. The government wants to turn everyone into slaves. Giving people the option of going independent makes employees less desperate which forces employers to treat their employees better and pay them more in order to attract them. That's not what the government wants. I'm no fool, I see exactly what's going on here.
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Need a Bright Line
I sure hope that these court cases with set a precedent and define what a contractor actually is.
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Re: Need a Bright Line
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Re: Need a Bright Line
If the IRS rules aren't sufficient to prevent lawsuits, why would a court ruling do the trick? I haven't read them (sounds extremely boring), are they vague or confusing?
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Re: Re: Need a Bright Line
In all the cases that have been decided that I was able to read about, after an independent contractor had been in place for a while (sometimes years), the IRS ruled that they were not actually an independent contractor and that the client company owed back employment, FICA and Medicare taxes. The "rules" have many grey areas.
If a court hands down a ruling and includes "Bright Line Rules" it means that they have laid out the rules that everyone (not just lawyers) can look at and know how to determine which way the court would rule. One example is that in order to search your house a warrant is required that specifies what the suspected crime is and what evidence the search should find. The police are not allowed to just drive up and walk into your home uninvited and dig around for anything they can find that might indicate illegal activity. A "Bright Line" ruling should eliminate most if not all of the gray areas whether someone is an employee or independent contractor.
It could include things like is the person paying all of the correct Federal, State, FICO and Medicare taxes. Is the client company filing a proper 1099 for the contractor (which is a report to the IRS of the contractor's payments, is the contractor working for more than one client, and so on.
That way, everyone would know that if it swims like a duck, walks like a duck, has a short neck like a duck, and quacks like a duck, then it is really a duck and not a swan. The rules as they stand are "subject to interpretation" and the government (and especially the IRS) can make whatever interpretation they want in each case.
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Re: Re: Re: Need a Bright Line
That is true, but only in that jurisdiction. It would be even better if the IRS wrote clear rules. Of course any ambiguity could be on purpose so that they can later apply them differently in different situations to suit themselves, so the courts may end up being the best available solution anyway.
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Damn!!
I'm putting that on my resume, and I want my health insurace expenses reimbursed too ebay! Now!
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Re: Damn!!
with Uber, a driver does not.
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Re: Re: Damn!!
with Uber, a driver does not.
Good point!
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Yes. I have a good friend who drives for both Lyft and Uber.
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Dicey...
Here, the big tell for me is the IC's don't have to work at all if they don't want to (per my understanding). And it seems a thorny issue is that Uber/Lyft may set the prices, but are otherwise just the platform (unlike, say, a web developer who is an IC, but is still given specific tasks by the company, not third-party site users).
The public requests the service, the platform sends it out, a driver picks it up. That sounds like IC to me.
But ... then there is the fact that in many (other) legal contexts, the law is designed to weigh in favor of finding the party an employee (which makes sense as far as companies who regularly try to screw their workers with creative workarounds to making them employees).
Anyway, let's freaking hope they aren't found employees, as that would seem to set a dangerous precedent to online platforms in general.
NOTE: Robert Reich's story is a humanist piece about a normative world. It is about the way he thinks the law should be, not necessarily what it is.
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This is awesom!
Where is my health insurance techdirt???
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you haven't taken into account the 'encouragement' the judge(s) will get, along with the free rides, if they come down on the side of the cab companies!
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Maybe the judge is trying to destroy Uber and Lyft?
Just think how would this work for Uber if their drivers were now employees. Would Uber now need a payroll? HR? An accounting system, paying employer share of payroll taxes? Benefits? There would need to be documentation of people hired and terminated.
It would be a burden. Maybe that's what the judge wants.
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Having written thousands of resumes
Nearly ALL workers benefit from the legal protections afforded employees, but not independent contractors. From newspaper carriers to pizza delivery folks, indie contractors get the short end of the stick while being held to the same standards as employees without the benefits.
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Comment about article
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Uber
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It's called democracy. People in this democracy aren't wild about laizze-fare capitalism the way the Ayn Randian heroines of the books on your library shelf are. They prefer regulation of their taxis and services for both their own safety and the welfare of the otherwise strangers who function as their drivers (the welfare of strangers.. what a shocking idea!)
Hey the 19th century called. They want their jungle and their robber barons back.
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If that were true, not only would this be a self-limiting problem, but it would have already ceased to exist.
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Given that ride-sharing services like Uber are wildly popular everywhere they turn up, both with passengers and drivers, I don't think this is actually true.
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The answer may be to create a professional drivers' license for drivers who pick up paying passengers along with other driving jobs, e.g. courier work. This would cover all aspects of professional driving, not just taxi or courier work. I'm just throwing this out... is it feasible? Is it necessary?
Actual taxi and courier drivers need licenses and insurance to cover those risks. It's unfair that someone else can pop up, do the same job for less, but not have to pay for the licenses and insurance that the others do. Since I used to work for an insurance company, I do understand the risks they're insured and licensed for.
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Are these ride-sharing services less expensive than taxis? I had always assumed they were more expensive, since they give greater value.
"Actual taxi and courier drivers need licenses and insurance to cover those risks."
So do Uber drivers (and probably Lyft, but I'm not sure).
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You mean a commercial driver's license?
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Where we are headed
Uber and Lyft are just momentary blips in the evolution of technology, much like video stores. Auto-driving cabs will be here sooner than we realize, and then the taxi industry and the ride contracting industry will suddenly find themselves as strange bedfellows, lobbying local politicians to outlaw auto-driving cabs.
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Re: Where we are headed
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Ah yes... contracting ourselves to the bottom
http://www.mercurynews.com/business/ci_26778017/tech-company-paid-employees-from-india-little -1
What was the quote from Thomas Jefferson?
Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains.
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Re: Ah yes... contracting ourselves to the bottom
Are there any statements in particular you'd like to rebut?
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The bigger picture
Before I get into why, it's important to understand two things; The fundamental requirements of being an independent contractor, and how employers and individuals benefit from hiring employees and contractors.
While many states have specific guidelines on being an independent contractor, the common these is that they're truly "Independent" and can make their own schedule, and choose/decline work based on personal preferences.
From an operations perspective, businesses benefit from the employee model by having control over the individual. Deadlines and productivity goals can't be guaranteed unless you have reliable labor resources, so being able to command individuals to work a prescribed schedule and perform tasks that might not otherwise want to is key. Of course this comes at a higher cost, as employees are subject to wage and overtime laws, whereas independent contractors are not.
Before Uber was even a dream, the Taxi and Limousine industry had encountered these issues, with some companies being sued out of business for violating labor/wage law. The post mortum in these cases showed that in some cases the businesses were clearly taking advantage of the workers by treating them like employees and paying as independents, but in many cases the individuals simply didn't care. As individuals they just wanted to work, as much as they could, because they had families to support, and didn't care about the time and a half - they just needed to work 100 hours per week to make ends meet. The bottom line is that these cases were more political than justice, were about creating more jobs in a down economy, and the net effect was that most business switched to employee models to insulate themselves from future liability, then hired more people to eliminate the overtime.
In conclusion, the results of this case will set a precedent that eventually levels the playing field, allowing the traditional transportation companies switch back to the independent contractor model, lowering the prices and allowing them to once again compete on price, or it will force the app based companies to raise prices. What do you think it better?
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Driver Status
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uber,lyft
Tommy, Uber & Lyft driver
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