(Stock Photo)
The California Labor Commission recently ruled an Uber driver was an employee of Uber–as opposed to an independent contractor–and therefore must be reimbursed approximately $4,000.00 for expenses she incurred as an Uber driver. Uber is a ride-sharing company that allows a person to request a ride via the company’s smart phone application. Once a request is submitted, a nearby Uber driver is alerted to the request and can come pick up the customer. All transactions are completed electronically through the smart-phone application.
Of course, Uber has had to deal with a unique set of issues recently here in South Carolina. In January 2015, the South Carolina Public Service Commission ordered the ride-sharing company to cease operation in the state. Last month, after public and political backlash, the Commission granted Uber a temporary license to operate which was to expire June 30, 2015. However, Governor Nikki Haley signed a bill on June 24, 2015, allowing Uber to operate if licensed by the South Carolina Office of Regulatory Staff.
Although not precedential, the California Labor Commission’s ruling is interesting, even for other Uber cases before that same Commission, as the ruling is only applicable to that particular driver. When determining whether an individual is an employee or an independent contractor, California, like South Carolina, looks to a putative employer’s control over the employee. In South Carolina, courts look to the purported employer’s right to control the performance of the work. Specifically, South Carolina courts looks to the following four factors:
- direct evidence of the right to, or exercise of, control;
- furnishing of equipment;
- method of payment;
- right to fire.
Why is the classification of employee vs. independent contractor important to South Carolina employers? For one thing, employees enjoy significant state and federal rights that independent contractors do not. South Carolina employer’s must provide workers’ compensation insurance and pay unemployment insurance to the South Carolina Department of Employment and Workforce (assuming the employer meets the minimum threshold requirements).
Additionally, South Carolina employers must adhere to the requirements of the Payment of Wages Act, S.C. Code Ann. § 41-10-10, et seq, which provides that an employee can recover three times the full amount of any unpaid wages, as well as costs and attorney’s fees. However, the Payment of Wages Act “does not embrace the earnings of independent contractors.” Adamson v. Marianne Fabrics, Inc., 301 S.C. 204, 206-07, 391 S.E.2d 249, 250 (1990).
The designation of employee vs. independent contractor could also affect an employer’s responsibilities under federal laws, including the Fair Labor Standards Act (FLSA), which controls overtime and minimum wage requirements, and the Family Medical Leave Act (FMLA). Employees are eligible for protections under these laws, while independent contractors are not. There are also social security and healthcare implications to such a designation.
As such, the decision of the California Labor Commission regarding Uber, is a prime example of the growing tension between economic business models based on sharing and the traditional definitions of what constitutes an employee or independent contractor.