When is a worker an employee? When is a worker an independent contractor? Answers to these questions are pivotal in determining payments, if any, when an injury occurs. The classification of a worker as either an independent contractor or an employee has important ramifications in terms of compensation and injury claims.
In fact, there are many cases where a worker is wrongly classified as an independent contractor. When such an individual is injured on the job, reclassification as an employee may qualify the individual for workers compensation benefits.
Who is an Independent Contractor?
In simple terms, independent contractors are workers who have “substantial control” over when and how they perform their tasks. They must often supply their own tools and equipment. By contrast, employers typically exert a great deal of control over employees, dictating when, where and for how long they will work.
Companies often use independent contractors to cut costs. Over time, a variety of factors have driven up the cost to hire employees:
- Worker’s compensation insurance costs
- Minimum wage increases
- Employer social security and medicare contributions
- Unemployment insurance costs
- Collective-bargaining costs
Defining Worker Status in a Newer Industry
The debate over just who is an employee and who is an independent contractor is often staged anew as each new industry takes shape. The online transportation network in which Uber and Lyft compete is one example.
Thus far, Uber and Lyft have successfully claimed that their drivers are independent contractors, largely because such drivers have control over when and how much they will drive. However, the companies have been named as defendants in lawsuits challenging the independent contractor status of the drivers.
Cases involving both Uber and Lyft have made their way into the Federal District Court for Northern California in San Francisco. Last summer, a federal judge gave preliminary approval to a $27 million settlement to be distributed among 163,000 former and current California Lyft drivers. Those who drove more than 2,000 hours in one year could qualify for payouts exceeding $5,000.
In the Lyft case, California’s Labor Commissioner sided with Lyft drivers, suggesting the company exerts substantial control over them by dictating fares, routes and reimbursement. It even requires a specific greeting when a driver picks up a rider – a smile and a fist bump.
If the Lyft settlement is finalized, drivers will continue as independent contractors, but the judge will not rule on the independent contractor vs. employee question, so future litigation may follow.
A case involving Uber is also assigned to the Northern District of California. The lawsuit involves over 380,000 Uber drivers that performed services in Massachusetts and California over a seven-year period. Observers suggest they may collectively receive a settlement ranging from $84 million to $100 million.
However, if the court deemed them employees, payout calculations soar to over $700 million. It is reported that federal regulators are investigating the exact terms and conditions under which the Uber drivers in those two states operated. The amount of control that a company exerts over workers is often critical in the independent contractor/employee debate.
Contesting Independent Contractor Status
If you suffer an injury as an independent contractor, it is still possible that you can be re-classified as an employee, thereby gaining the protections of the state’s worker’s compensation laws. Even when employee status is not achievable, an injured independent contractor still may have recourse under the state’s personal injury laws.
An attorney actively working with relevant workers comp and personal injury laws is often of assistance in determining a worker’s legal rights. Our firm fights hard to get our clients the full compensation they deserve under all applicable laws. To learn more, please contact us.