The Uber model: Worker classification in the sharing economy — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

The Uber model: Worker classification in the sharing economy

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The car service company Uber exemplifies America’s new sharing economy, testing the often blurry boundary between employee and independent contractor.

Uber’s drivers are independent contractors who use their own vehicles and check a mobile phone app to review a listing of available fares and then decide whether or not to pick up a customer. Drivers must maintain a company-specified level of insurance and must charge the customer a company-established rate.

It’s a business model that invites confusion and controversy.

Several dozen Uber drivers have filed a class-action lawsuit claiming they have been misclassified as independent contractors and are entitled to be reimbursed for expenses they say Uber should have to pay, such as for gas and vehicle maintenance.

When courts and regulatory agencies examine independent contractor relationships they look at several factors, including the amount of control the employer exerts over the employee/contractor, whether the work is performed by a specialist with little supervision, the length of the “contract” and whether the worker provides his or her own tools.

In Uber’s model, the company exerts control by restricting the number of cars on the road at any given time to keep fares at desired levels.

Driving is not a particularly high level skill, but neither does Uber supervise drivers very closely. They are free to choose their own routes and reject fares for any reason. Uber drivers provide their own tools—an insured vehicle and a mobile phone with an Uber app.

Obviously, this model may seem attractive to employers used to paying for employee benefits and withholding payroll taxes. Uber-like “jobs” are cropping up in many industries.

If you are considering adopting a system like Uber’s to staff your business, consult an attorney first. Companies that rely on independent contractors instead of employees can expect lots of regulatory scrutiny. Federal and state agencies are increasingly suspicious of the sharing economy and its impact on workers, who may end up earning less than minimum wage and miss out on benefits like health insurance.

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