The new economy is based upon a new definition of workers: where you once had an employee, fully protected by labor laws, social security and workers’ comp, you now have independent contractors who operate with zero benefits. Where independent contractors used to be characterized by their unique skills and complete independence from control, you now have workers who labor under policies and procedures determined by companies who insist that they are not employers.
So how would you define an Uber driver: employee or independent contractor? A lawsuit filed in California and Massachusetts alleges that drivers are employees and thus entitled to all employee benefits. Uber insists that the drivers are independent contractors.
A Matter of Principle – or Not
The lawsuit is on the verge of a settlement. Uber will pay $85 million, without any finding of fact regarding employee status. Drivers will share anywhere from $24 to $8,000, depending upon how many hours they have driven for Uber. (Some drivers are against the proposed settlement.) Attorneys for the drivers will collect something less than $20 million. While participants in the lawsuit will apparently agree that they are not employees, the issue remains unsettled for the many thousands of drivers who are not parties in the suit.
In other words, nothing has been resolved. Uber’s business model continues apace, at a significant cost but also with significant savings to the company, as they are not going to be paying 30 percent or more for a conventional payroll based upon benefits. Uber is literally buying time.
The Changing Nature of Employment
The long standing paradigm of employment operates with payroll deductions, paid overtime, legislated benefits and “rules of engagement” concerning discrimination and equal opportunity. It has offered considerable protections, job security and formidable benefits to American workers for many decades. This employment model brought prosperity to millions of workers.
The new paradigm strips away the protections, the security and the benefits and replaces them with a hint of independence and dazzling new technologies. It’s not at all clear whether the new model can deliver prosperity for its workers. In the meantime, the battle of the paradigms will play out in the courts, where the fate of workers is a bargaining chip and attorneys charge by the hour.
Senior Workers Compensation Consultant