Three Recent Cases Find that Workers at Uber, FedEx, and others are Employees, not Independent Contractors

posted by Michael R. Fortney  |  Jun 23, 2015 07:33 AM in Employment Law:Contracts and Agreements

When faced with the question of whether a worker is an independent contractor or an employee most courts apply the common law test. Under that test the central question is "who had the right to control the manner or means of doing the work?" The more control the worker has, the more likely the worker is an independent contractor. The more control the employer exerts, the more likely the worker is an employee.

The WFAL Construction case dealt with the statutory 20-factor test to determine whether workers on construction sites are independent contractors or employees for purposes of Ohio Worker’s Compensation law, previously discussed here. In order for a court to find that a worker is an employee under the test, at least 10 of the 20 factors must apply to the worker. In WFAL the court held that 10 factors applied to the construction workers in the case, so therefore the workers were employees.

Some of the more interesting factors that led the court to determine that the workers were employees were (1) the workers were paid weekly for hours worked, (2) since the workers were paid hourly they would not realize a profit or loss on the work done, meaning they were not at risk like independent contractors are, and (3) none of the workers would incur liability if the relationship ended.

These factors deal less with control over the work performed and deal more with the idea that independent contractors have their "skin in the game." The wider the margin between profit and loss, and the more the profit or loss depends on the worker, the more likely it is for courts to find that the worker is an independent contractor. The smaller the margin between profit and loss the more likely it is that the worker is an employee. This new idea was one of the reasons a court found that drivers working for Uber are employees instead of independent contractors.

Uber, the ride-sharing app similar to a taxi service, affords their drivers a lot of control over the manner or means of doing the work. While a car is required and certain rules apply to the car (clean, 4-door, newer than 2005) drivers can use a wide variety of cars. Drivers also set their own hours and work whenever they want for as long as they want. Drivers are also free to select and reject fares. It would appear that based on the typical common-law test that these drivers are independent contractors, however using the newer test the Uber court held that the drivers are employees because they are not at risk for losses and because the service they provide is an integral part of Uber's business model.

The court held that while Uber only exercised limited control over the drivers when they were actually driving, Uber holds control over almost every other aspect of the business. This includes not allowing drivers to work if their ratings fall below 4.6, running background checks on prospective drivers, the car limitations discussed above, and only registered drivers may use the app (although an independent contractor should be able to subcontract out work if he chooses).

Additionally, the driver has little control over the work besides owning and operating the vehicle. The prices for fares are set in advance by Uber, meaning all drivers are paid the same amounts and are paid regularly, two of the factors from WFAL. Uber charges drivers a non-negotiable service fee. Uber can only be used and accessed through the Uber app. And most importantly, Uber would not survive as a business without the Uber drivers, which means that the driver and the owner are dependent on each other, not independent like contractors.

In another case dealing with drivers, FedEx recently settled claims with its California drivers that it cheated its employees out of pay and benefits by mislabeling them as independent contractors. This followed a 2014 Ninth Circuit Court of Appeals decision holding that the Fedex drivers were employees and not independent contractors.  As explained by the Ninth Circuit Court, “The drivers must wear FedEx uniforms, drive FedEx-approved vehicles, and groom themselves according to FedEx’s appearance standards. FedEx tells its drivers what packages to deliver, on what days, and at what times. Although drivers may operate multiple delivery routes and hire third parties to help perform their work, they may do so only with FedEx’s consent.”  These and other factors led the Ninth Circuit to conclude that Fedex had the right to control its drivers, and that the drivers were actually employees.

If you would like more information about distinctions between employees and independent contractors, construction, employment, or labor issues, or if you would like to speak to an attorney, please visit our website


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