In the era of Uber, Lyft and other so-called “gig economy” companiesAirbnb, the lines between independent contractor and employee have become blurred. Consider the case of Raef Lawson, who worked as a delivery driver for six months for GrubHub, Inc.; a Although he was classified as an independent contractor, Lawson was expected to be available during set shifts and remain in designated geographical areas.
Lawson viewed himself as an employee, and as such, he believed the company should reimburse his expenses and pay him at least minimum wage and relevant overtime. In a lawsuit in federal court, he alleged that GrubHub violated California’s minimum wage, overtime and employee expense reimbursement laws.
Lawson started his lawsuit as a class action but only his individual claims went to trial. In what JD Supra called “a win for California’s ‘gig economy employers,’” the court held that GrubHub properly classified driversLawson as an independent contractors, not an employees, and thus arehe was not covered by the labor laws that apply to presume an employer-employee relationship.
The court found that GrubHub had little control over the “manner and means” of its drivers’ work. Among the determining factors: it doesn’t require drivers to undergo any training or orientation, and no supervising employee performs ride-alongs with drivers to track their performance.
While this case provides some clarity for some members of the gig economy, proper classification remains a challenge for many businesses. The Department of Labor commissioned a study to determine the extent of misclassification in the unemployment insurance system; it found up to 30 percent of audited firms had employees misclassified as independent contractors.
What is an independent contractor?
California’s lawbor code defines an independent contractor as “any person who renders service for a specified recompense for a specified result under the control of his principal,” based only on the result of his work, not the means by which a result is accomplished. Independent contractors typically are paid on a 1099 freelance basis, without tax withholdings.
Why does the classification matter?
Employees enjoy protections and benefits that independent contractors do not, including benefits (like medical insurance and stock options), reimbursement for work-related expenses, and overtime and workers’ compensation insurance. Employers may improperly classify employees as independent contractors to avoid paying payroll taxes and complying with wage and hour law requirements.
Misclassification occurs in nearly all major industries, according to the AFL-CIO’s Department for Professional Employees, including:
- Delivery
- Trucking
- Building maintenance
- Janitorial
- Agricultural
- Home health care
- Child care
How do I know if I am classified under the proper job status?
When determining whether an individual is an independent contractor, the California Department of Industrial Relations says, the courts will consider:
- Whether the worker is engaged in an occupation or business distinct from that of the employer;
- Whether the work is a part of the regular business;
- Whether the employer supplies the materials and location for the worker;
- Whether the service rendered requires a special skill;
- If the work is done under the direction of the principal or by a specialist without supervision;
- If the workers’ opportunity for profit or loss depends on his or her managerial skill;
- How long the services are to be performed;
- The degree of permanence of the working relationship; and
- Whether the worker is paid by time or by job.
For Lawson, the story may not be over; he has filed an appeal with the 9th Circuit Court of Appeals. His attorneys have appealed the finding that Lawson was an independent contractor and a previous ruling that blocked him from pursuing the case as a filing a class action lawsuit.
Watch for updates on this lawsuit, which will have far-reaching effects for the 30 million independent workers across the country.
If you believe your employer has misclassified your role, you may be entitled to back wages, overtime and expenses. Contact Keller Grover at 866-663-3308 for a free consultation.