When it comes to the "gig economy," one of the more controversial issues is how Uber, Lyft, Amazon and other companies save money by classifying their workers as independent contractors rather than employees. Contract workers aren't eligible for many standard workplace benefits and protections, such as employer-paid payroll taxes, access to workers' compensation and unemployment insurance, and the right to be paid the overtime premium rate. They're not even guaranteed the minimum wage.
As we've discussed before, the federal Fair Labor Standards Act (FLSA) governs the classification of employees, absent more protective state laws. At least one competitor has sued Uber claiming that its alleged misclassification of its employees amounts to unfair competition, as law-abiding companies can't afford to offer prices as low as Uber's.
More often, however, workers themselves bring lawsuits, often as class actions, claiming they should be classified as employees. Unfortunately for some, the U.S. Supreme Court ruled earlier this year in Epic Systems Corp. v. Lewis that employers can require workers to sign agreements requiring all legal claims to be handled in individual arbitration, as opposed to individual or class action lawsuits.
Epic Systems may spell the end of employee classification lawsuits in the gig economy if employers widely adopt individual arbitration agreements. Recently, the 9th Circuit Court of Appeals upheld Uber's use of individual arbitration clauses. A group of drivers had tried to bring a class action claiming they were misclassified. The 9th Circuit, citing Epic Systems, ruled that they must resolve their classification claims individually in arbitration.
That is significant because arbitrating claims individually will cost significantly more per case than would pooling resources for a class action. Moreover, even if the arbitrator were to find that the drivers are misclassified, an arbitration award does not create a precedent. Uber could theoretically lose every arbitration and still go on classifying its drivers as independent contractors with no court to order them to change.
It's important to note that the 9th Circuit's ruling doesn't apply directly in Florida, which is in the 11th Circuit. However, judges in our circuit are likely to weigh the 9th Circuit's reasoning heavily when ruling in similar cases.
It's also important to be aware that the 9th Circuit's ruling does not resolve the question of whether gig economy workers can properly be classified as independent contractors. It simply held that the issue must be decided on a case-by-case basis in arbitration.
If you have questions about whether you are properly classified, whether you've been told you're an independent contractor or an FLSA-exempt worker, contact an employment law attorney who is familiar with wage and hour laws.