According to a March 2019 report by Bloomberg, Uber Technologies Inc. has agreed to pay $20 million to settle claims by workers that they should have been classified as employees and not as independent contractors.
Employee classification provides many benefits that independent contractor status does not:
- Employees are entitled to health and other benefits that independent contractors are not
- There are generally tax advantages to being classified as employees. For starters, the employer is responsible for paying part of the taxes.
- Employees are better protected when it comes to wage (such as minimum wage pay), overtime, and other pay benefits.
- It’s generally more difficult to fire an employee than an independent contractor
- Employees are generally entitled to sick leave and other leave options
- Employees can file discrimination lawsuits where warranted
The lawsuit challenged Uber’s business model of classifying most of its drivers as independent contractors.
A key factor in the lawsuit was whether the case could be tried as an open class action lawsuit or the cases had to be decided individually through private arbitration. The drivers asserted that the rideshare company “made it onerous for them to opt-out of the arbitration provisions.” The settlement only covers employees who aren’t covered by mandatory arbitration clauses – so not every driver will be classified as an employee. Advocates for the remaining drivers argued that the mandatory arbitration provisions are not voluntary and shouldn’t be enforced.
The lawsuit originally covered about 385,000 drivers in California and Massachusetts. After an appellate court ruled that the arbitration agreements were essential valid, the class only covered about 13,600 drivers.
California is now considering legislation that would make it much easier for most drivers to be classified as employees.
The case is O’Connor v. Uber, 13-cv-03826, U.S. District Court for the Northern District of California (San Francisco).