Tell-Tale Signs of Independent Contractor Misclassification

On Behalf of | April 17, 2017 | Wage & Hour

Uber. Lyft. Instacart. Caviar. Homejoy. It seems hard a month passes without news about a lawsuit alleging that these on-demand gig-economy services are ripping off their workers.  Uber and Lyft alone have been sued in dozens of lawsuits alleging that they misclassified their drivers as independent contractors.  Some drivers who sued Uber reached a class action settlement valued up to $100 million, only to have it shot down by a federal judge in San Francisco as inadequate in the penalties component.  SF-based Instacart recently announced a $4.625 million nationwide settlement for the same issue – potential misclassification of the shoppers as independent contractors instead of employees.

Of course, misclassification of workers as independent contractors has been a long-running danger for companies seeking to minimize labor costs.  Witness the decade-long legal fight over FedEx’s old practice of working directly with “independent contractor” drivers, which led to a landmark $240 million settlement in 2016 over claims for overtime pay and reimbursement for expenses, among other claims.

If a worker is an employee, a company must comply with minimum wage and overtime laws, meal and rest break rules, and a host of myriad employment regulations.

What are some early tell-tale signs that a contractor might actually be an employee entitled to all the protections of employment law?

  • The business model of the company is that you, the contractor, are the workforce that drives the entire business.
  • The company calls you a business partner, but you do not have the bargaining power to negotiate important terms, like the price.
  • The company touts that you will earn good money, but ignores the fact that you will have to cover many expenses on your own – such as a car, cell phone, and equipment – in order to do the work.
  • The company sells you on the flexibility of working only when you want to, on your own schedule, but you are evaluated on how quickly you respond and how much work you accept.
  • The company says you are the boss, but does not let you hire subcontractors and does not let you set the rules.
  • The company says you are professionals with expertise in what you do, but controls how you are doing the work all the time, along the way or by evaluating you afterward.
  • The nature of the work is not highly specialized and does not require a license or credential (for instance, not a licensed trade).
  • You have an ongoing relationship with the company, not a one-off gig, and you are dependent on the company for income.

At the end of the day, it comes back to economics.  If you pencil it out and you are barely scraping by after all your time and expenses and IRS taxes are accounted for, and you have no employee benefits, while your company is watching over you, not paying payroll taxes, and profiting handsomely but not sharing its profits with you – you may well be “misclassified.”

The content of this blog post is for informational purposes only and not for the purpose of providing legal advice. You should contact an employment lawyer to obtain advice with respect to any particular issue or problem.