At the heart of this case is the issue of employee classification, specifically whether or not the Uber drivers who are part of the class action lawsuit were incorrectly classified as independent contractors when they were actually employees. The problem of employee classification is not unique to Uber – companies across all industries and of all sizes use independent contractors, and understanding the differences between independent contractors and employees can be a tricky business, one that regulators are highly aware of. In FY 2015 alone, employee misclassification investigations conducted by the Wage & Hour Division of the U.S. Department of Labor resulted in more than $74 million in back wages being awarded to more than 102,000 workers.
While there’s no one single definition of an independent contractor, widely accepted legal definitions explain independent contractors are workers who individually contract with an employer to provide specialized or requested services on a project or as-needed basis, but who are not employees. When it comes to evaluating claims of misclassification, investigators examine the relationships between employers and workers who are classified as independent contractors.
The rejection of the settlement essentially leaves Uber with two options: increase the amount of the settlement, or proceed with the trial and risk a jury verdict that could end up costing the company billions (yes, billions) in additional wages.
Make sure to check out the recap of one of G&A Partners’ recent HR webinars: Employees vs. Independent Contractors, presented by Anu Mannathikuzhiyill, PHR. Click here to watch the recorded webinar.
This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.