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Why Did a California Labor Commissioner Rule Uber Driver was Employee, Not Independent Contractor?

The California Labor Commissioner recently ruled that a specific driver for Uber was an employee, and not an independent contractor.  The IRS and the State of California have been aggressively pursuing “misclassification” audits – specifically targeting independent contractors.  The “old rules” established from a Microsoft case in the 1990’s laid groundwork for criteria that determined “employee” versus “independent contractor” status.

Many of these criteria focused on the influence of the “employer” over hours worked, how the work was to be performed and when, tools used for the job, access to facilities, as well as duration of “employment” and questions of whether the independent contractor truly worked for one “employer” or multiple companies.

The recent ruling here in California concerning Uber noted “the minimal degree of control that [Uber] exercised over the details of the work was not considered dispositive because the work did not require a high degree of skill and it was an integral part of the employer’s business” and that, in reality, Uber is “involved in every aspect of the operation.”

The central question for most business owners is “do we want to handle this in-house, or do we want to purchase this good/service from someone else?”  This question has become much more challenging in recent years as the IRS and the State of California search for additional tax revenue by targeting the classification of independent contractors.

If you use independent contractors as part of your business strategy, or are making the decision of whether to hire an employee or contract with an independent source we invite you to call us for a free and substantive consultation at 866-631-3470.