Uber’s Ruling Is No Watershed Moment For The Freelance Economy
This article originally appeared in Forbes on June 24, 2015.
The recent ruling by the California Labor Commissioner that an Uber driver should have been classified as a W-2 employee, not an independent contractor, is not a watershed moment for the freelance economy. The ruling stated that Uber is “involved in every aspect of the operation” and ordered the company to reimburse Barbara Ann Berwick $4,152.20 in expenses for the eight weeks she worked as an Uber driver.
Let’s be clear. This was one decision in one state about one driver for one company. The ruling by the California Labor Board should be weighed against the thousands of actions taken by various state and federal authorities which support the flourishing freelance economy. The ruling does not apply beyond Ms. Berwick and could be altered if Uber’s appeal succeeds.
In a statement, Uber said:
The California Labor Commission’s ruling is non-binding and applies to a single driver. Indeed it is contrary to a previous ruling by the same commission, which concluded in 2012 that the driver ‘performed services as an independent contractor, and not as a bona fide employee.’ Five other states have also come to the same conclusion.
Despite the fact that Uber may be controlling many aspects of how its drivers interact with consumers (I’m sure the fact that a driver can’t negotiate rates was a big consideration) Ms. Berwick knew exactly what she was signing up for when she joined Uber.
This was not Microsoft back in 1997 when the tech giant misclassified thousands of employees as independent contractors seemingly to avoid paying them benefits. In many instances, the “temporary employees” Microsoft hired worked for years alongside permanent employees. Both sets of workers performed the same job functions, while only the full-time employees were eligible for benefits. That was a clear case of worker misclassification. Abuses like that need to be regulated and workers protected. The Uber case is nothing like the Microsoft case. More importantly, the Uber case does not have wide ranging implications for other companies that use freelancers.
While this is no clarion call against the freelance movement, it is another example — one of hundreds — of why companies utilizing a freelance workforce need better tools and technology to mitigate their compliance risk. Just as important, they need appropriate processes and technology in place to track their independent engagements.
There are rules that must be followed…although those rules can be confusing (and in some cases contradictory). Businesses properly adhering to state and federal classification laws should ensure they continue to do so. Those that don’t are playing a dangerous game.
With the federal government announcing new steps to crack down on the growing trend of misclassification, now more than ever is the time to invest in technology that can help businesses properly manage their freelance engagements. That technology is called a Freelance Management System (FMS).
FMS software helps businesses better manage their growing freelance workforces and provides them with a powerful compliance engine they can use to track their independent engagements and mitigate their risk. FMS software arms today’s businesses with the tools, data and audit trails they need to adhere to state/federal labor regulations and prevent incidents of worker misclassification.
The Uber ruling is just the most public event in what we hope will be a long and necessary discussion on how we tax and regulate labor in the United States. I remain cautiously optimistic that discussion will allow us to craft the right legislation for the workforce of the 21st century. Until then, prepare accordingly.