One of these days, there will be a definitive higher court ruling on whether Uber must treat its drivers as employees or independent contractors. At that time, the precedent will be firmly established regarding whether Uber drivers should be considered “employees” or “contractors.” The latest chapter in the ongoing saga of Uber and drivers seeking redress for what they claim are abuses of worker classification regulations played out in a New York State courtroom recently. Here’s what the latest ruling means and some possible ramifications of the ruling.
It is a testament to the truly disruptive nature of companies like Uber (and others in today’s growing, app-driven gig-economy) that ongoing, independent litigation continues in multiple states with workers challenging the veracity of their classification as independent contractors. In mid-July, The Unemployment Insurance Appeal Board of New York State ruled Uber is liable for unemployment benefits for three drivers, along with others who are “similarly situated.” Unsurprisingly, Uber disagrees, and will likely appeal.
In the decision, the Appeal Board viewed Uber’s recruitment, training and supervision practices as a clear indication that drivers hew closer to the regulatory definition of “employees” than that of “ICs.” Citing credible evidence that Uber exerted sufficient supervision, direction and control over the three claimants and other similarly situated drivers, the Board ruled that the claimants were indeed covered employees for purposes of unemployment insurance.
Industry experts suggested that this decision would erode the central business tactic relied on by Uber and the many other gig-economy organizations. However, the issue seems far from being settled law― being only one case of many being litigated in courts and agencies across the nation. So it is not likely that there will be any definitive precedent set anytime soon. In fact, it may ultimately require legislation at the federal level which can be slow to occur at best.
In the meantime, the implications are somewhat dire for organizations utilizing contractors and engaging in legitimate gig-economy business. Running operations in any business is difficult enough when the rules are established and well-known. The uncertainty and often conflicting rulings surrounding IC classification in the burgeoning gig-economy poses a significant hazard for businesses. It can be daunting for a workforce management department to stay abreast of local, regional and national regulatory changes in real time. Especially when there are so many other competing considerations to deal with in the effective management of human capital.
Therefore, for many organizations, it may make sense to rely on a service provider like an MSP or an employer of record agency whose core business depends on being well-versed and compliant with legal and regulatory strictures governing labor utilization. It is a matter of survival for these types of solutions to certify that the contractors they deliver are properly classified and furnished with all the legally required compensation and benefits according to the most current laws and regulations. The successful MSP or EOR is successful precisely because they’ve proven effective at protecting their customers from shifting winds and evolving trends that can impact the workforce.
The jury is both literally and metaphorically out on whether gig workers must be treated as employees or contractors. But the verdict is definitely in on whether it makes sense to lean on a specialized workforce solution provider to keep abreast of the changes and out of the crosshairs.