Are rideshare drivers independent contractors?
It's a question we get asked a lot by new drivers. We always tell them, no matter how you look at it, drivers are independent contractors. This means you, as a driver, are in charge and have the responsibility of running your own business.
For Uber and Lyft, most people prefer this because it gives them the flexibility of setting their own hours and operating when they want. But, there is another group of drivers, mainly full-time drivers, who would prefer to be classified as employees, to ensure a steady and consistent paycheck. This is completely understandable as being a full-time driver, over time, has proven to be unsustainable and the rideshare business model is more geared towards side hustle types.
That is why in California, the legislation of AB5, attempted to ban independent contractor work and nearly claimed the jobs of the hundreds of thousands it was supposedly intended to help.
Let's back up a bit. In August of 2020 a California Supreme court judge ruled that Uber and Lyft would have to stop classifying their drivers as independent contractors. Ten days later, California’s First District Court of Appeal stayed the lower court’s injunction. The companies would have to submit sworn statements from their chief executives confirming they have “developed implementation plans” for compliance with AB5 that would presumably go into effect if the appeals court “affirms the preliminary injunction and Proposition 22 on the November 2020 ballot fails to pass.”
According to Uber and Lyft executives, if this were to happen their whole business model would change and they would have to cut the amount of drivers allowed to drive in half.
Uber CEO Dara Khosrowshahi said, "Uber would only have full-time jobs for a small fraction of our current drivers and only be able to operate in many fewer cities than today, Rides would be costlier which would significantly reduce the number of rides people could take and, in turn, the number of drivers needed to provide those trips.”
They have even brainstormed the idea of abandoning California all together if Prop 22 were to fail to pass. But, on November 3rd, California voters had their voices heard as Proposition 22 passed by a 58% margin meaning that ride share drivers would remain independent contractors.
Here is a breakdown of what Proposition 22 means for ride share drivers:
Exempts App-Based Transportation and Delivery Companies from Providing Employee Benefits to Certain Drivers. Initiative Statute.
* Classifies drivers for app-based transportation (rideshare) and delivery companies as “independent contractors,” not “employees,” unless company: sets drivers’ hours, requires acceptance of specific ride and delivery requests, or restricts working for other companies.
* Independent contractors are not covered by various state employment laws—including minimum wage, overtime, unemployment insurance, and workers’ compensation.
* Instead, independent-contractor drivers would be entitled to other compensation—including minimum earnings, healthcare subsidies, and vehicle insurance.
* Restricts certain local regulation of app-based drivers.
* Criminalizes impersonation of drivers