Ride-sharing app Uber is a reality in New Orleans.

By June 22, 2015Employment

Now that we’re emotionally committed to being a cosmopolitan city, it’s probably a great time to start asking the question, “what is Uber, anyway?”

Let the growing pains begin. And if our more experienced sister states show us anything, it’s that they haven’t figured out what Uber is either. Just last week, a California labor administrator concluded that Uber drivers are employees, and that Uber is its employer. Uber’s appeal to the civil court is pending.

“Why does this matter to me?” Well, if you’re a prospective Uber driver, your status as “employee” or “independent contractor” will affect how you’re paid (federal minimum and other wage laws), how you pay taxes (federal law), and how you’re protected if you’re injured on the job (state workers’ compensation law). For businesses who seek to run a fleet of Uber cars, the status of your drivers as employees or independent contractors (IC) can change your entire bottom line.

“So how will drivers, companies, and Uber be classified in New Orleans?” That’s a tough question to answer in light of the changing marketplace, but in the past, the classification analysis was squarely fixed on the drivers themselves.

In the late 90s, the Internal Revenue Service developed the analysis by which drivers within the  limousine industry would be classified (employee or IC) for the purposes of determining company tax liability. Under the IRS methodology, companies like Uber should be able to point to its drivers: 1) significant investment; and 2) their realization of profit and loss by their own efforts and industry (considered the “critical factors” in the analysis). The analysis gets much more detailed but if those two factors are met, then Uber would only need to show that its right to control those drivers isn’t that of an employer (if any of the three “significant factors” regarding driver autonomy/control are met, the analysis is usually over and there is no employment relationship). Although the IRS study was conducted for the limousine industry, the factors should be helpful in the taxi industry as well. In essence, the limo industry is largely employer-based, but the IRS analysis is pretty complete and it seems to address the “what ifs” that point to taxi drivers as ICs under many business models.

The California determination last week was pretty light on this type of analysis and it was focused mainly on what Uber aims to do; not what its drivers actually do. Companies and drivers shouldn’t expect any principled and consistent rulings on these issues for some time, owing mostly to Uber’s “big guy” perception.

Armed with already-existing, industry-specific analysis, you can probably have the employee/IC question answered to everyone’s liking, before disputes arise.

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