The labor world is changing thanks to ever evolving technology. There used to only be two types of workers – independent contractors and employees. The recent $100 million settlement by Uber and Lyft, leaders in the new world of the gig economy, highlights how not adjusting to these changes can be costly.
The class action lawsuit filed in California on behalf of 240,000 Uber and Lyft drivers claimed that they were improperly classified as independent contractors seeking additional compensation. Along with $100 million, the settlement also included limitations on when gig workers could be “deactivated” as well as providing for an appeals or arbitration process. In a big concession, drivers will be able to solicit and collect additional tips.
The gig worker is certainly not like a full-time or even part-time employee who works for one company but they are also not like a freelancer or independent contractor either. Why? Because in the gig economy, there’s an intermediary like Uber facilitated by technology who:
- Takes a percentage of the fee
- Controls the brand
- Controls the relationship with the client
This settlement provides the beginning of a blueprint for this new economic worker.
Which raises the question of when a worker is an employee and when they are considered an independent contract. If the person is in business for themselves, they would be considered independent. But if they are economically dependent on the employer, they would be considered an employee. Gig employees are somewhere in-between.
As the national law firm of Fisher & Phillips points out:
Modern businesses have long bemoaned the fact that the current legal standard is based on a 20th century legal test and calls for sorting workers in one of only two categories: either employees or independent contractors. As some legal scholars have pointed out, when it comes to sharing economy business models, this is sometimes like trying to take a square peg and jamming it into either one of two round holes.
