In yet another sign that the DOL is closely watching the 1099 rules, Uber just got killed in a California Case involving their drivers. With 200,000+ drivers this will have majorconsequences for their business model. From Employee Benefit Advisor, click here for the full article and the rules.
In a major setback for Uber’s business model, the labor commissioner of California ruled last month that an Uber driver should be classified as an employee and not an independent contractor.
While the ruling applies to only one driver in San Francisco and does not set a precedent for how Uber compensates its 200,000 drivers, it is one of a growing number of decisions that may have far-reaching implications for service-oriented businesses in the “sharing” economy. Uber says that its drivers are independent contractors and not employees, which means Uber does not consider itself responsible for paying drivers’ job-related expenses such as mileage and insurance. Moreover, as contractors, drivers are responsible for paying 100% of the federal payroll tax (FICA/FUTA).
Uber Technologies Inc. was ordered to pay a San Francisco driver more than $4,100 to cover the cost of vehicle mileage and tolls. The labor commissioner found that Uber is “involved in every aspect of the operation” from vetting drivers and their vehicles to setting rates for trip fares, and therefore is legally an employer of its drivers. Uber plans on appealing the ruling.