by Bernard D. Nomberg, Partner, The Nomberg Law Firm
For many of us we hear “gig economy” and think it’s another millennial hashtag with absolutely zero meaning in our everyday life. But really, the emergence of the gig economy has a direct impact on us all. Put simply, the “gig economy” is a new way of saying independent contract or part-time work, and over 55 million people are working this way now. That number is only expected to grow as technology and time progresses. So this raises a new question: if corporations are switching to contract labor as opposed to employed workers, what happens to benefits like Social Security, workers’ compensation, and other benefits that come with being an employee?
Companies like Lyft and Uber use the “gig” business model to contract out its work, and thereby avoid paying claims like expense reimbursement to drivers, minimum wage standards and overtime pay, and taxes to the IRS. This triggered a slew of lawsuits by drivers who want to be classified as employees. Lyft has already settled some of these suits to the tune of nearly $29 million. Meanwhile Uber has suggested it is willing to pay up to $170 million to quiet the riot of lawsuits barraging it.
The central idea to these lawsuits is that the companies want to find a new way to classify employees in an already heavily regulated area and the drivers believe their rightful classification is as an employee. So far, the app-based companies are in the lead at the federal scale. Peter Robb, in his office as general counsel for the National Labor Relations Board, declared in a memo in May that Uber drivers are independent contractors and not employees because they “set their hours, own their cars and are free to work for the companies’ competitors.” This means drivers are unable to unionize and obtain the legal protection unions provide for workers complaining about working conditions.
California’s response to the upheaval has been what is known as Assembly Bill 5. This bill adds a new element in California to the federal test to determine employment status. The new element being that the company wanting to classify the workers as independent contractors has to show the work performed is outside the usual course of business for the entity. While Uber has responded with confidence that it will still be able to pass the test at the state level, those outside the corporation are not so sure. This confidence will be tested on January 1, 2020 because Governor Newsom of California signed the bill and it is set to take effect on that day. The significance of California making this law and not the federal government is that the corporations are based within the state; so the state law controls what the companies can and can’t do. However, it will still take time and litigation to prove the effects this new law will have on the gig companies, whether the companies will move to avoid an unfavorable outcome or continue to gain clearance to operate as usual. Only time, and more lawyers, will tell.
If you have questions about the gig economy, your classification as a driver or if you are injured driving/riding in an Uber/Lyft, please call The Nomberg Law Firm. We are located in Birmingham, Alabama. Office number is 205-930-6900. For further information, please visit our website: Nomberglaw.com.
Bernard D. Nomberg has been a lawyer for more than 20 years. Bernard has earned an AV rating from Martindale-Hubbell’s peer-review rating. In 2018, Bernard was named a Super Lawyer for the 6th year in a row and he was recognized as one of the Top 50 Lawyers in Alabama.