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Will Lawsuits Force Uber and Lyft to Reclassify Drivers as Employees?

Thousands of consumers across the country have benefited from the ride services provided by companies like Uber and Lyft. They love the convenience and affordability of using these companies for their transportation needs. The arrangement is beneficial for the people who choose to be drivers as well. Their work hours are flexible, and they are free to work as much or as little as they like.

Driver%20Uber%2013410617-001.jpgUber and Lyft categorize their drivers as independent contractors rather than employees. Essentially, these companies see themselves as a conduit between customers who need transportation and drivers who are willing to offer them a ride. They don’t dictate the hours that a driver works, nor do they specify how drivers must dress or what type of car they drive.

This is an attractive business model for many technology-driven, app based start-up companies. These organizations may have few assets, and classifying workers as independent contractors relieves them of the responsibility to make Social Security contributions, carry unemployment and worker’s compensation insurance and pay for employee expenses like gas and maintenance.

Some Uber and Lyft drivers are banding together to demand that they be reclassified as employees. They have filed lawsuits that are aimed at achieving this goal, which would force the companies to bear considerable expenses. The expenses are so sizable that some analysts say that the businesses would simply have to fold if the courts find in favor of the plaintiffs. In essence, Uber and Lyft would have to pay enormous fines for the misclassification of employees. Additionally, they would be responsible for paying employees a minimum wage and overtime.

Proponents of the shared economy model say that the laws being applied to it are simply outdated. Because no laws currently speak specifically to regulation of peer-to-peer services and whether workers should be employees or independent contractors it’s virtually impossible to make a fair and legally just conclusion.

UPDATE: Since publishing this post, a California Labor Commissioner has ruled that at least one Uber driver should be classified as an employee (WSJ article). Labor Commissioner rulings such as this rarely have any influence in lawsuits like the ones currently in front of two federal judges.