Contractor or Employee? The Legal Identity of Uber Drivers

By: Sari Richmond

Edited by: anna dellit and Avigna RamaChandran

1. Introduction

Uber, the popular ride-hailing service that debuted in 2009, controlled over 75% of the U.S. ridesharing market as of May 2024.[1] Soon after its inception, Uber has faced a continuous legal battle as it continues to defend its classification of drivers as independent contractors. Since its business model provides drivers flexibility, primarily the ability to choose their own working hours, the company has claimed they should not be classified as full-time, or even part-time, employees. This classification has significant implications as it determines whether Uber is responsible for providing minimum wage, unemployment benefits, and other worker protections.

Moreover, distinguishing whether Uber is a technology company or a transportation provider lies at the crux of this issue. [2] If Uber is merely a platform connecting drivers and riders, it is not technically employing those drivers. However, courts and legislators have challenged this argument, citing Uber’s pricing algorithms, driver rating systems, and other forms of control that suggest an employer-employee relationship. This legal discourse has played out in California, the European Union, and beyond.[3] 

2. Uber’s Statements on Driver Classification 

Uber has released multiple statements over the past decade defending their assertion that drivers should be classified as independent contractors. This messaging has remained consistent, even as lawmakers and courts have scrutinized Uber's business practices. In 2019, the passage of California’s Assembly Bill 5 (AB5) introduced the “ABC test,” which is used to determine whether a worker is an employee or independent contractor—if the hiring entity can establish items A, B, and C are true, then workers can be classified as independent contractors.[4] Put simply, criteria A states that workers must operate free from the hirer's control in both contract terms and actual work; criteria B states that the worker's tasks must be outside the hiring entity’s usual business activities; criteria C states that the worker must be independently engaged in the same trade or profession. Through the interpretation of AB5 in 2020 by the California Court of Appeals, Uber was prohibited from categorizing drivers as independent contractors.[5] 

In response, Uber—along with Lyft and other gig-economy companies—invested over $200 million into Proposition 22, a ballot measure that successfully exempted them from the law. Uber framed the campaign around driver flexibility, arguing that if forced to classify drivers as employees, it would have to impose rigid schedules and limit the number of people who could work on its platform.[6] The campaign was successful, and Proposition 22 passed in a popular vote.

Most recently, in response to the U.S. Department of Labor’s 2024 Final Rule regarding worker classification, Uber reiterated that it does not believe this rule will impact its operations or driver status.[7] Uber has emphasized that the rule does not contain an "ABC test" for classification and that federal officials have stated the regulation is unlikely to result in large-scale reclassification of gig workers. Additionally, Uber continues to push for a middle-ground approach in state-level legislation. The company points to laws like Proposition 22 in California and an agreement in New York that maintain drivers' independent status while offering certain benefits.[8]

3. Being an Employee vs. an Independent Contractor

The legal debate over what constitutes being an employee versus an independent contractor can appear mundane to those working traditional 9-5 jobs that offer guaranteed benefits, but the financial impact felt by individuals who classify as independent contractors is substantial. Employees have access to employer-provided 401(k) plans and other retirement benefits, while Uber drivers are not guaranteed these same benefits, nor are they guaranteed workers’ compensation benefits if injured on the job.[9] Uber has argued that its independent contractor model allows drivers to maximize earnings by working only when it is most profitable and boosts driver retention retains drivers due to schedule flexibility. However, labor advocates contend that the lack of basic protections leaves drivers vulnerable, especially during economic downturns or personal emergencies. [10]

4. Conclusion

The debate over Uber’s driver classification remains unresolved. Uber has repeatedly defended its independent contractor model, arguing that it benefits drivers by offering flexibility; however, courts and labor activists have challenged this claim, pointing out the company’s undue level of control over drivers and the economic disadvantages of independent contractor status. Despite legal victories for Uber like Proposition 22, Uber’s employment model remains under threat. Lawsuits, legislative efforts, and even shifts in public perception may force Uber to adjust its approach. As the gig economy continues to evolve, the question remains if Uber’s independent contractor model will be able to continue.

Notes:

1. Chen, Audrea. 2024. “Columbia Undergraduate Law Review.” Columbia Undergraduate Law Review. 

2. Frazier, Ryan. n.d. “Sharing Is Caring: Are Uber, Lyft Drivers Independent Contractors?” 

3. TRÂN NGUYỄN. 2024. “Uber and Lyft Drivers Remain Independent Contractors in California Supreme Court Ruling.” AP News. 

4. Primm, Adam, and Sean McKinley. 2024. “California Supreme Court Unanimously Rules That Uber, Lyft Drivers May Remain Classified as Independent Contractors.” Benesch, Friedlander, Coplan & Aronoff LLP - California Supreme Court Unanimously Rules That Uber, Lyft Drivers May Remain Classified as Independent Contractors. Benesch Law. 

5. Wooters, CR. 2024. “Uber Newsroom.” Www.uber.com. 

6. Marzzacco, Christopher J. 2024. “Marzzacco Niven & Associates.” Marzzacco Niven & Associates, May.

Bibliography:

Chen, Audrea. 2024. “Columbia Undergraduate Law Review.” Columbia Undergraduate Law Review. September 5, 2024. https://www.culawreview.org/current-events-2/employee-or-independent-contractor-a-legal-analysis-of-ubers-worker-misclassification.

Frazier, Ryan. n.d. “Sharing Is Caring: Are Uber, Lyft Drivers Independent Contractors?” Www.kirtonmcconkie.com. https://www.kirtonmcconkie.com/publication-367.

Marzzacco, Christopher J. 2024. “Marzzacco Niven & Associates.” Marzzacco Niven & Associates, May. https://doi.org/10851853084/INthCJ2jwKIDEJzGyLYo.

Primm, Adam, and Sean McKinley. 2024. “California Supreme Court Unanimously Rules That Uber, Lyft Drivers May Remain Classified as Independent Contractors.” Benesch, Friedlander, Coplan & Aronoff LLP - California Supreme Court Unanimously Rules That Uber, Lyft Drivers May Remain Classified as Independent Contractors. Benesch Law. 2024. https://www.beneschlaw.com/resources/california-supreme-court-unanimously-rules-that-uber-lyft-drivers-may-remain-classified-as-independent-contractors.html

TRÂN NGUYỄN. 2024. “Uber and Lyft Drivers Remain Independent Contractors in California Supreme Court Ruling.” AP News. AP News. July 26, 2024. https://apnews.com/article/california-drivers-uber-lyft-independent-contractors-0aaa5cd01c28d8a575cf1bc3aa3f44a4.

Wooters, CR. 2024. “Uber Newsroom.” Www.uber.com. January 9, 2024. https://www.uber.com/newsroom/dol-final-rule-2024/.