Uber and Lyft are offering lots of perks to help delivery drivers operate as independent businesses. They include work hubs to find other delivery work and business tax filing discounts. But the real goal of helping drivers operate as independent businesses is to avoid having to treat them as employees.
Gig economy companies may find it harder to avoid paying employee benefits. A California judge has ruled that Uber and Lyft must treat drivers as employees. If you use independent delivery drivers in your business, here's what the ruling means for your business.
Delivery Drivers on the Payroll
Employment law has been ambiguous for gig workers. California recently passed a law clarifying the employment terms of delivery drivers. Under the new law, drivers must be treated as employees. As employees, they are entitled to minimum wage, unemployment insurance, sick leave, and other standard employee benefits.
The California ruling follows a similar ruling in France in March, in which employment attorneys were successful in making ride-hailing drivers employees. The change of employment status for drivers increases the delivery driver expenses for gig economy companies. They now have to pay unemployment insurance, payroll taxes, and other expenses.
New Independent Contractor Employment Law
Crucially, the California judge decided that delivery drivers do not meet a new three-pronged test to be classified as independent contractors. In California, this new employment law is known as AB5. Professions classified as independent contractors include lawyers, accountants, physicians, investment advisors, and gig economy workers.
Delivery drivers, however, do not meet the three criteria to operate as independent contractors, according to California courts. An independent contractor:
New Employment Laws for the Gig Economy?
Will more states pass laws similar to AB5 for delivery drivers? An upcoming California ballot 22 will influence the outcome. Uber, Lyft, DoorDash, and other companies employing independent delivery drivers are backing the initiative. In November, lawmakers will vote either:
Whatever the outcome, gig economy companies need to adapt their employment relationship with app-based delivery drivers. Uber, for example, wants to pay driver health insurance benefits based on hours worked. To comply with changing employment laws and maintain a competitive delivery driver fleet, consult with your employment attorney.
Share