How Ruling That Drivers Are Employees Upends Uber Business Model

By | June 19, 2015

  • June 19, 2015 at 5:54 pm
    Will says:
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    I think you are missing the bigger issue. Uber claims to be just an app that connects people. However, it determines price. It determines who can drive and it also raises prices based on its own formula. They control every aspect of the transaction. If it were truly just an app than as a driver I could determine my own prices. As a rider, I could choose how much I want to pay. Hopefully the courts make Uber reduce its role in the transaction between the drivers and riders so the market can determine the prices.

    • June 22, 2015 at 9:29 am
      insurance_guy says:
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      In a few short worlds, you summarized the problem very well.

  • July 19, 2015 at 3:50 pm
    John says:
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    Not sure what IRS rules you’re reading but base on the IRS, drivers SHOULD BE CONSIDERED EMPLOYEES.

    Common Law Rules
    Facts that provide evidence of the degree of control and independence fall into three categories:
    1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
    – Uber controls ALL aspects of how the ride-share works.

    2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
    – Uber controls WHAT, HOW MUCH, HOW AND WHEN you get paid. So answer is yes, again.

    3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
    – “The IRS is not required to follow a contract stating that the worker is an independent contractor, responsible for paying his or her own self employment tax” – So even with a contract IRS can still recognize a driver as an employee.
    – “However, the lack of these types of benefits does not necessarily mean the worker is an independent contractor.” – Lack of benefits DOES NOT mean you’re not an employee.
    -“If you hire a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that the intent was to create an employer-employee relationship.” – When you sign up for Uber, Uber is EXPECTING a long relationship (or else how else would they grow as a company). IF and a BIG IF, Uber said you can only sign up for 3 months, 6 month, etc, then this would not apply. They DON”T so it does.
    – “If a worker provides services that are a key aspect of the business, it is more likely that the business will have the right to direct and control his or her activities. ” – Without the drivers, there would be NO UBER. So again, yes.

    Source: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee
    Source: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Type-of-Relationship



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