San Francisco based ride sharing company Uber has arguably become a phenomenon. With the ability to locate an Uber driver and have a ride within minutes, the company has threatened to change the taxicab industry forever. However, with any new and successful company come legal challenges, and Uber is no different.
It is already facing a slew of lawsuits from passengers and drivers injured in accidents. Now it is under fire from some of its own disgruntled employees who want to be considered employees under California's labor laws. Uber staunchly maintains that its drivers are independent contractors, but state regulators believe that Uber's stringent rules make drivers employees. Essentially, the California Labor Commission believes that Uber controls everything that govern what the driver does, from the systems they use, to how they charge for fares, and many other things in between.
The distinction between independent contractor and employee could mean billions to the state and federal government. This is because as a business that employs workers, Uber is responsible for paying payroll taxes, including Social Security, as well state and federal taxes, among others. So the determination between independent contractor and employee will focus on several factors, including, but not limited to:
- The worker's opportunity for profit or loss
- The worker's investment in the enterprise
- The amount of control exerted over the worker
- The duration of the relationship.
In all, there are 20 factors that the IRS (as well as state agencies) look at to determine if a worker is an independent contractor or an employee.
In the immediate case, Uber has appealed the Commission's ruling, so it remains to be seen whether the company will be held liable.