America and the Not-So-Independent Contractor

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A recent ruling in California that Uber drivers are employees, and not independent contractors, highlights a problem in American employment classifications — and has some commentators calling for the creation of a new class of “dependent contractors” to fill in the gray area.

While Uber has claimed that it is merely a facilitator, connecting drivers and passengers, critics have pointed out that Uber drivers are dependent on the company in a way truly independent contractors aren’t.

This isn’t the first time ride-sharing services have been at the center of the issue. Regarding a case involving Uber competitor Lyft, U.S. District Court Judge Vince Chhabria wrote in March that “At first glance, Lyft drivers don’t seem much like employees. … But Lyft drivers don’t seem much like independent contractors either.”

In theory, freelance contractors can only be hired in situations where the company does not control how work is accomplished. If a company sets hours, gives specific training or otherwise directs the worker’s day-to-day habits, that worker should be classified as an employee. But employers sometimes unlawfully hire workers as independent contractors in order to avoid paying benefits and certain taxes.

Independent contractor misclassification lawsuits are becoming increasingly common in the U.S., as both workers and the Internal Revenue Service are recognizing the scope of the problem. While both traditional and non-traditional taxi services have gotten quite a bit of press over the issue lately, Bloomberg notes that “construction, janitorial, staffing, Internet services, landscaping, cable companies, security, health services, educational services, performing arts [and] publishing” are also frequently in the crosshairs of such lawsuits.

Consumers may also become concerned with the divide between employees and contractors, especially when it comes to issues of liability on high-value projects (roofing, for example, an industry that’s expected to do work lasting for between 25 and 50 years, often relies on independent contractors).

And even when employers don’t purposely misclassify employees, there are an increasing number of business models that don’t lend themselves to a neat divide between freelance workers and employees.

Chhabria wrote regarding the Lyft case that the jury, to ultimately decide the matter, “will be handed a square peg and asked to choose between two round holes.”

What’s the solution? It’s clear that one is needed, especially as more and more workers are developing flexible arrangements with their employers. In the words of Bloomberg’s Justin Fox: “Time to start carving out some square holes.”

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