On September 11, 2019, a class action lawsuit was filed in California to determine whether Uber drivers are employees or independent contractors. The lawsuit followed the passage of a California labor bill, known as Assembly Bill 5, which would compel companies, such as Uber, to classify its workers as employees rather than independent contractors. The complaint claims that Uber has misclassified its drivers under California’s employment test (“ABC Test”). The ABC Test, outlined in Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903 (Cal. 2018), states
…unless the hiring entity establishes (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact, (B) that the worker performs work that is outside the usual course of the hiring entity’s business, and (C) that the worker is customarily engaged in an independently established trade, occupation, or business, the worker should be considered an employee and the hiring business an employer under the suffer or permit to work standard in wage orders. The hiring entity’s failure to prove any one of these three prerequisites will be sufficient in itself to establish that the worker is an included employee, rather than an excluded independent contractor, for purposes of the wage order.
Dynamex Operations W., 4 Cal. 5th at 964.
The implications of the decision can potentially change the business landscape in California, and possibly the country, going forward. The ABC Test looks to the employers to establish each factor of the test to show that the worker is in fact an independent contractor.
As of now, Uber is maintaining that it would not have to reclassify its workers to employees. If Uber drivers are deemed employees, the implications for the California based company would be many, including, but not limited to, tax and benefit ramifications.
Although this litigation is just commencing, it could possibly change how employers analyze, classify and hire workers in the future.
Reference Article: https://www.nytimes.com/2019/09/12/technology/uber-drivers-california.html