Uber considers its drivers to be independent contractors. That means they aren't responsible for things like taxes and unemployment fees for their drivers. California disagreed so strongly that after the National Labor Relations Board ruled that drivers were contractors, they passed a law specifically targeting Uber and similar companies. The goal is to force numerous companies to hire their gig workers as employees.
While the world focused on California's treatment of Uber drivers as employees, New Jersey quietly audited and decided that yes, Uber drivers (despite the NLRB ruling) were employees. Uber owed back taxes and fines, totaling $649 million.
Uber spokeswoman, Alix Anfang told The New York Times, "We are challenging this preliminary but incorrect determination because drivers are independent contractors in New Jersey and elsewhere."
New Jersey, of course, disagrees, and this will land in court.
If you're neither an Uber driver nor user, you may think this won't affect you, but rideshares aren't only industry making use of contract labor. You may be a gig worker or work with people who are freelancing or contracting.
It's never illegal for a person to work as a contractor or gig employee, but if your company employs such people, you need to be careful that you meet the rules and regulations. The IRS and the Department of Labor used to monitor that, but now states are getting involved, looking at more money for their state coffers.
Uber, of course, has many, many attorneys looking at the situation, and your business probably can't afford such a legal team. But, it's worth consulting with one to determine if your gig workers are classified correctly. Roughly, your contractors must
- Use their own equipment
- Set their own schedules
- Be free to work for competitors
- Be responsible for their own profit/loss
If they cannot meet those conditions, they are most likely employees and should be treated as such. In a separate lawsuit filed against Uber, lawyers claim that Uber drivers are employees because Uber exerts control over their schedules.
Do not take the risk and try to save money by misclassifying people who should be employees as freelancers. If you provide a laptop, require someone to be onsite every day for set hours, don't let them work for competitors, and provide a steady check, they aren't contractors, they are employees.
Please note, a person cannot waive their right to be an employee. Just because everyone agreed to it (and the gig worker may prefer it), you can still end up in legal trouble should the government ever conduct an audit, or the gig worker decides to complain.
While California and New Jersey have their eyes on the big players, they may come after you as well. It's always worth paying a local employment attorney to guide you on the legal aspects of hiring gig workers. Or you may find yourself on the receiving end of such a fine.