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Policies, Procedures & SafeguardsSeptember 21, 2015
Digital disruptors are everywhere and they are rapidly changing the face of the global economy. They are however, also giving rise to new legal claims, in particular of the employment relations kind. The ride sharing App Uber is facing court over the question of whether their drivers are considered to be independent contractors or employees?
Uber is an application that allows users to track their taxi’s arrival progress and pay for their fare using their mobiles. Uber’s business model is based on a network of taxi drivers – in this case, anyone who has access to a car and meets the company’s safety requirements. Uber is taking on the highly regulated taxi industry by offering consumers affordable, independent and convenient means of transportation.
Making headlines is the class action that has been mounted in the District Court of California on behalf of almost 160,000 Uber drivers who are asking whether they are classed as employees or independent contractors. Uber drivers believe they are employees and the District Court, on a preliminary basis, agrees. On September 1 the Court allowed the case to proceed as a class action , now Uber must prove that they do not have an employer/employee relationship with their drivers.
The distinction between employee or independent contractor is vitally important. If Uber drivers are considered to legally be employees then Uber has an obligation to provide them with minimum employee entitlements. Uber would also be responsible for meeting all the driver’s operating expenses such as drivers’ licence fees, servicing costs and insurance.
This case may also provide insight for similar companies such as Airbnb, Lyft and TaskRabbit who also link consumers to goods and services via an App.
Uber is using a high profile media campaign to defend the litigation. They are leaning on the support of a group of Uber drivers who are happy with the flexibility and autonomy that Uber provides them when working.
At the moment it is unclear whether Uber drivers are legally employees or independent contractors as there is no clear statutory definition of an independent contractor. The Court has developed a complex multi factor test which helps determine a worker’s legal status. This includes the way work is performed, how it is paid for, whether the worker is free to work for anyone else, the provisions of the trade and the worker’s reporting obligations.
Being engaged as an independent contractor is often mutually beneficial to the worker and the company, as it provides both with autonomy in how they regulate working conditions. The more traditional forms of employee contracts do not offer the same level of autonomy and flexibility.
However, the lack of an employer/employee relationship can also be detrimental as it means the employee is not protected by the minimum conditions of employment within the National Employment Standards and Awards. This becomes an even bigger problem if the employee becomes classed as an independent contractor where entitlements are not currently set out. The Fair Work Act 2009 contains provisions aimed at stopping genuine employees being wrongfully classed as independent contractors however, the lack of a statutory definition makes it difficult to exercise.
Ultimately, it will benefit both workers and employers to know their working relationship. If you are unsure whether your workers should be classified as independent contractors or employees call Employsure today on 1300 651 415. We assist you defining the difference and your obligations as an employer.
Sourced via the Financial Review