Hunton Employment & Labor Perspectives

Across the country, worker misclassification issues continue to be a significant risk for employers.  One hot button issue is whether workers in newer, technology-based industries, such as ride-sharing, are properly classified as independent contractors rather than employees.  Last week, an appellate court in Florida considered whether Uber drivers are properly classified as independent contractors or employees for purposes of benefits under Florida’s unemployment insurance statute.

Looking both at the driver’s contract with Uber and the nature of the parties’ relationship, the appellate court found that Uber did not maintain the type of control to which a traditional employee is subject and therefore found that Uber drivers are not entitled to benefits under Florida’s unemployment insurance statute.  A copy of a decision can be found here.

While the court’s decision is a victory for Uber and perhaps other employers under Florida law, other states apply different tests to determine whether a worker is an independent contractor or employee. Indeed, some other state agencies, including the California Labor Commissioner’s Office, have reached a different result.  Plaintiffs also continue to challenge employers’ classification of workers as independent contractors through litigation, and the Obama Department of Labor took a broad view of the employer-employee relationship.  For example, in 2016, Uber reached settlements in two misclassification class action lawsuits brought in California and Massachusetts for a proposed $100 million, while Lyft, another ride-sharing service, settled its own misclassification class action for $27 million.  In fact, the judge presiding over the Uber class actions rejected the $100 million proposal, asserting that such amount does not sufficiently compensate drivers, particularly under California labor law.  The alleged damages sought in both the Uber and Lyft cases were grounded in state labor law protecting employee compensation rights and benefits.  Because of the substantial financial risks misclassification carries before state and federal agencies and through private litigation based upon federal and state laws, employers are well-advised to consult counsel when classifying or considering to classify any worker as an independent contractor and to review their existing practices.