Uber drivers employees or independent contractors?
Independent vs. Employees was the subject of a recent a landmark decision in Britain which ruled that Uber drivers have the same employment rights as other full-time employees, is sending shockwaves through the nation’s so-called “gig” economy. The company, Uber Technologies, is appealing the ruling.
Uber had argued that it was a tech firm rather than transport and that as its drivers were self-employed contractors, it was not obliged to provide the kinds of statutory employment rights full-time workers would expect. The similar dispute between Uber and its drivers has reached Canada and mirrors lawsuits in other jurisdictions such as Britain. The Ontario class action claims Uber drivers are employees and are entitled to minimum wage, overtime and vacation pay.
The lawsuit seeks $200 million in damages on behalf of any person who has driven for Uber in Ontario since 2012, arguing that they have been misclassified as contractors and are entitled to minimum wage, overtime pay, and vacation pay.
If the Uber drivers are successful in being certified as a “class” the outcome of the case will hinge on whether Uber drivers are considered employees or independent contractors.
Uber, unsurprisingly, asserts that its drivers are independent contractors. The complainant is taking an opposing position and feels that drivers are employees. There is also a third category of worker (“dependent contractor”) which might apply. The stakes are potentially very high for Uber given the number of Uber drivers.
What is the difference between independent contractors & employees?
Independent contractors are typically entitled to a wage based either exclusively on commission, per service fee or an hourly rate. Generally, compensation doesn’t include the payment of benefits, and there is no entitlement to overtime pay or vacation pay. Also, unless the contract states otherwise termination, even without cause, can occur at any time without notice.
Employees, on the other hand, can be paid in a variety of ways. It can be based on an hourly rate, commission, fee for service, yearly salary or a combination. Employee’s wages are subject to tax deductions at the source; independent contractors are paid in net amounts. Further, employees, except under limited exceptions, do not get the benefit of deducting their expenses. Independent contractors do.
What if the parties had agreed that the driver is considered an independent contractor? That is not good enough. A flower that looks and smells like a rose is a rose even if it is called an orchid. There are many judgments which have ruled workers to be employees even though the contract identified them as independent contractors and they were paid net amounts without any deductions at source.
How is an independent vs. a contractor determined?
Firstly, to what extent is the worker integrated into the operation of the main contracting party.
If a worker is a self-employed contractor, they normally bring their own tools to use at work. Also, if they have their own distinct business name which is publicly displayed on a uniform, it is a sign that the are independent and not integrated. Whereas, if they are provided with the tools of the trade and a uniform which bears the name of the party they work for it is more likely they will be seen as integrated into the workforce as an employee. Other factors which are considered is whether the worker uses his/her own phone or is one provided by the main contractor with the main contractor’s phone number? There are other considerations, but the critical factor is the degree to which it is established that the worker’s operation is distinct from that of the main contractor. The more distinct and independent it is, the less likely it will be that the worker will be deemed an employee. The more it appears that the worker works for the main contractor, the more likely it is that an employment relationship will be found. The phrase which is used is whether it is a contract “of” service (independent contractor) or “for” service (employee).
Secondly– the degree and exclusivity of controlling the main contractor exercises over the worker.
If the worker is tied to a schedule, to the main contractor’s clients and to the methods dictated by the main contractor for doing the work, the more likely it is that an employment relationship will be found. The greater the degree of independence regarding scheduling and in choosing her/his clients, the greater the likelihood that the worker will be found to be an independent contractor.
The British court said Uber drivers should be classified as employees, earn at least the national minimum wage and get paid vacations. Another hearing will be held to determine the amount of pay drivers should receive.
Meanwhile in Ontario, if the class action moves forward, it will be an interesting case to follow based on the rulings and different findings in various jurisdictions.
The materials provided on this site are for information purposes only. These materials constitute general information relating to areas of employment law familiar to employment lawyer, Shelley Brian Brown. They do NOT constitute legal advice or other professional advice, and you may not rely on the contents of this website or blog as such.
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