So far Uber hasn’t had a great start in Dallas and Fort Worth (according to reviews). Uber has seen great success in other areas. It is widespread in the major cities in California despite an existing availability of taxi drivers. Major cities around the country are tackling the issues with Uber and other ride-sharing services in different ways. Many cities are adopting ordinances restricting the ride-share business or requiring drivers to follow the same safety and insurance regulations to operate in the city. Other cities, like San Antonio, have loosened restrictions to encourage these businesses to provide private transportation in the city. In addition to the city regulations, a number of questions exist about the business model remain unresolved.
Dallas-Fort Worth Uber Drivers: Employees or Independent Contractors?
One of these questions involves whether the drivers are actually employees or contractors. Uber, and I believe the same is true of their competitors, classifies their drivers as contractors rather than employees. Uber has carefully designed its business model to give the appearance that the drivers are independent contractors who freely decide whether to accept or reject possible routes. However, disagreement exists whether the underlying rules for drivers are sufficiently onerous to appropriately classify the drivers as employees instead. Florida’s labor agency has determined the drivers are employees and this week California’s labor agency joined in determining the drivers are employees and not independent contractors. An ongoing lawsuit resides in the federal district court in San Francisco in a case that appears to be headed for trial and probable appeals.
Determinations of employee versus contractor status are complex legal assessments. The analysis is typically a mix of questions of law and fact that often require a trial to resolve the fact questions. The legal tests employed at various levels of the law all involve applying the individual facts to a set of factors and no one factor is enough to decide the answer. Instead, each of the facts in the relationship weigh under the factors. One jury’s determination could be completely different from the next. It is likely we will see more state labor agencies weigh in and more lawsuits over Uber and its competitors’ employment practices. The results will likely not be consistent.
Misclassification of employees in Dallas and Fort Worth
Misclassification of employees as contractors can be an expensive result for employers. Misclassified employees can shift the burden of the self-employment social security and medicare taxes back to the employer. (Which is 7.5% of income for the year.) The misclassified employees may also deserve to fringe benefits. Many misclassified employees work more than forty hours. Employers owe them overtime compensation at 1.5 times the regular rate of pay. In addition to unpaid overtime the employee is entitled to liquidated damages which doubles the unpaid overtime award. The employee can also recover court costs and attorney’s fees. So there is a lot at stake in these lawsuit.