Are your workers independent contractors or employees?

Companies that classify workers as independent contractors as opposed to employees, should be prepared to face scrutiny.  In a California court, a recent judgement ruled in favor of four truck drivers who sued for reimbursement, citing that they should have been classified as employees, as opposed to independent contractors.   

Originally, the four drivers all owned their own trucks and used them to transport cargo, but when the ports implemented clean air regulations in 2008, they were no longer able to use their trucks, because they had higher emissions.  The trucking company purchased trucks for the drivers to use, and required the drivers to enter lease agreements, while not allowing the drivers to use the trucks for other jobs, yet still classifying the drivers as independent contractors.  The court ruled that the drivers should be employees based on multiple factors including: 

·         2 of the drivers were terminated without notice following absences for personal reasons.

·         The drivers were an integral part for the company in the transportation business.

·         The company supervised the drivers.

·         The drivers weren’t allowed to use the trucks for other jobs.

California has also ruled in favor of a woman who argued that as an Uber driver, she should be classified as an employee and not an independent contractor.  Uber is an American based international transportation network company, which allows users of its mobile application to submit a trip request via their smartphone, which is then routed to a driver who uses their own car.  The company, along with other similar app based companies have come under intense scrutiny for classifying the workers as independent contractors as opposed to employees.

The woman who sued Uber claims that if she wasn’t compensated for expenses, that she would be making less than minimum wage.  Under California law, employers are required to reimburse employees for business expenses.  Before this suit, Uber had prevailed in at least five other states in keeping the status of workers as an independent contractor.

According to the official IRS website, an independent contractor is defined as, “an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.”  An independent is not “if you perform services that can be controlled by an employer (what will be done and how it will be done).”  With these definitions, it is increasingly important for companies to properly define your workers as either an employee or independent contractor to avoid potential legal issues.