Uber’s in the news yet again. This time, it’s Uber’s service in South Carolina that has spawned complications for the company. Since beginning service in this state in July 2014, Uber, a ridesharing company based in San Francisco, has continued to spread throughout the state, but not without raising the hackles of its competition, taxi companies, as well as the state agency tasked with regulating the industry, the Public Service Commission (PSC). On January 15, 2015, the PSC issued a cease and desist order to Uber for its actions in South Carolina, a move which was publically opposed by Gov. Nikki Haley; the order is in place until the PSC can resolve a request by Uber to be licensed differently than other taxi services are licensed. (Such pushback by regulatory agencies has been happening to Uber around the globe.) Why does this matter to you? Because if Uber is ultimately allowed to operate in South Carolina in the future, there could be significant legal issues that may arise as well, including issues involving employees’ rights.
To illustrate: last year, drivers for Uber brought a class action lawsuit against Uber in California, alleging that Uber has misclassified its drivers as independent contractors instead of employees. The company, recently valued at over $15 billion, uses a smartphone application to connect passengers with drivers of vehicles for hire. Drivers are required to pass Uber’s background screening process. Customers can use the app to request rides and track their reserved vehicle’s location. The app alerts the closest driver, who can accept the ride or not. The drivers then get paid a portion of the fare. But are these drivers Uber’s employees? Or are they just independent contractors? And why does that even matter?
The classification of employee vs. independent contractors is legally significant, as an employee has certain rights that an independent contract would not. For example, in this case, the drivers for Uber are required to pay for their own expenses, such as gas; if the drivers are employees, Uber would be required by California law to reimburse its drivers for these expenses. The classification of independent contractor, then, saves Uber significant money. Generally, employees are also provided other benefits, such as health insurance, that contractors would not receive.
The distinction matters under federal law, including under the Fair Labor Standards Act (FLSA), which governs overtime and minimum wages. Only if a worker is covered under the FLSA’s definition of “employee” would he be provided with the law’s protection. In South Carolina, classification as an employee also affects whether the worker qualifies for protection under certain state laws, such as the South Carolina Wage Payment Act. An employee bringing an lawsuit for unpaid wages has the possibility of receiving damages equal to three times the unpaid wage amount (called treble, or triple, damages), whereas an independent contractor would be limited simply to the amount of unpaid wages. The threat of triple damages provides greater leverage to employees in legal disputes. Employees are also covered by workers’ compensation, and independent contractors are not.
There are other aspects of the law that are affected by this employee/independent contractor dispute, but to go into them all here would likely produce more information than is necessary for you right now. However, if you’re wondering if your job is affected by this classification, or whether you’re really an employee despite being told you’re an independent contract, please don’t hesitate to contact our office and speak with an experienced attorney to get the advice you need to protect your legal rights.