Online, app-based companies such as Uber and Lyft recently attempted to settle class action lawsuits brought by drivers who contend they were misclassified as independent contractors rather than employees. Uber recently reached a proposed $100 million dollar settlement with drivers who worked in California and Massachusetts which keeps drivers classified as contractors. A federal judge unsealed the originally proposed settlement deal, which reflects potential damages closer to $852 million. On June 2, 2016, Uber drivers in New York also filed a federal class action lawsuit seeking millions of dollars in minimum wage and overtime pay. Lyft had also recently agreed to settle its class action lawsuit for $12.25 million, but a separate federal judge rejected the deal because it only represented about 9% of the drivers’ claims. Business models utilized by companies such as Uber and Lyft do not lend themselves to the traditional classification of employee versus independent contractor, and these lawsuits do not resolve the issue. There are proponents of a “hybrid” employee classification that would afford workers certain protections provided to employees, however, any third classification would require corresponding modifications to laws like the Fair Labor Standards Act, which can only occur through congressional action. As there is no indication from Congress that this issue will be addressed in the near future, we will likely continue to see the filing of class action lawsuits against Uber, Lyft, and similar companies alleging worker misclassification.
A person can provide services to a company as an employee or an independent contractor depending upon the nature of the relationship between the service provider and the company. Misclassification of employees as independent contractors remains a primary focus of many government agencies, including the IRS, U.S. Department of Labor, Florida Department of Economic Opportunity Reemployment Assistance Programs, and Florida’s Division of Workers’ Compensation. Investigations by these agencies can be extremely costly, time-consuming, and even lead to personal liability and criminal penalties!
The presentation in the following link explains the detailed federal and Florida tests that are used by these four agencies to properly classify service providers. It also provides practical examples in which the tests can be applied. Additionally, the presentation includes guidance to help mitigate the potential for employer liability regarding other wage and hour complexities and pitfalls.