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Are Uber Drivers Independent Contractors or Employees?

Key Takeaways

  • Globally, Uber generally views drivers as independent contractors, especially in the U.S. and Canada. However, in some countries, drivers are considered employees.
  • Employees work for one company with controlled work conditions and benefits, while independent contractors work with multiple companies, provide their own equipment, and lack employee benefits.
  • Uber prefers classifying drivers as independent contractors to reduce expenses such as payroll taxes, social security, and health insurance.
  • Laws like California’s AB5 and Proposition 22 impact classification. As independent contractors, drivers lack benefits like minimum wage protection, health insurance, and expense reimbursements.

Wherever you live, chances are you’ve gotten in a car with an Uber driver before.

You may even have had a conversation with the driver about their job’s nature and discussed the question: Are Uber drivers independent contractors or employees? The answer to that question depends on the country you live in.

In this guide, we’ll tackle this debate from several perspectives and settle the debate for you once and for all.

Direct Answer to the Uber Driver Classification Debate

Whether you’re driving with UberX or driving with Uber Eats, the global ride-sharing company views you as an independent contractor, not an employee.

This classification applies in the United States and Canada. Yet, Uber drivers are considered employees in other countries. An Uber driver’s classification ultimately comes down to the legislation of the country they work in.

Understanding the Two Definitions

The first step in holding the employee vs independent contractor debate is understanding the definition of each classification.

Here’s the scoop on the main differences between these classifications:

Definition of Employee

An employee is a person who works for only one company, and that company has direct control over how the work is done and the working hours.

Another aspect of employee status is that your employer provides any equipment you need to get the job done. This is a key difference between Uber drivers and those who work at taxi service companies. An Uber driver uses their personal car, while taxi drivers use company cars.

Finally, employees are entitled to benefits, such as pensions, health and dental insurance, and minimum wage.

Definition of Independent Contractor

On the other end of the spectrum, you have independent contractors.

An independent contractor isn’t limited to working with just one company. For example, an Uber driver can also register on Lyft and look for rides there. Also, a company that hires independent contractors doesn’t have a say in how or when these people work.

Since independent contractors are responsible for providing any equipment they need, they’re also responsible for any repair or maintenance costs.

On another note, independent contractors don’t get benefits like social security and health insurance. They’re also not protected by minimum wage laws and can be terminated immediately by the employer at any time.

Uber’s Stance on Driver Classification

Uber’s stance on classifying its drivers is pretty clear. The company views its drivers as independent contractors who use its platform as a way to connect with willing riders.

So, why does Uber operate like this? The answer is all about money and their business model of cutting costs.

By classifying its drivers as independent contractors, Uber avoids having to take on millions of dollars in expenses.

If Uber classified drivers as employees, the company would be on the hook for payroll taxes, social security requirements, and employee health insurance. This isn’t to mention car maintenance and repair expenses.

Although a lot of Uber drivers aren’t pleased with being classified as independent contractors, others see it as a good position to be in. The main reason is the flexibility they enjoy when deciding when to work. This comes in handy, especially for those who have other jobs.

Legal Battles and Regional Variations

Since Uber driver classification is a hot topic of debate, there are a lot of legal battles surrounding it.

A prime example of such legal battles is the California Assembly Bill 5 (AB5). This bill was proposed to change the classification of some gig workers from independent contractors to employees.

It was designed specifically to increase regulation on companies like Uber and Lyft which hire large numbers of independent contractors. The bill required these companies to use a “three-pronged test” to prove that a worker is an independent contractor and not an employee.

The AB5 didn’t see the light of day in the end. In November 2020, California voters approved Proposition 22. This law overrides AB5 and classifies drivers on app-based ride-hailing and delivery services as independent contractors.

Guess what?

Proposition 22 was an initiative backed by none other than Uber, Lyft, and DoorDash.

Implications for Drivers as Independent Contractors

While some Uber drivers feel like the benefits of being independent contractors outweigh the costs, others believe that they’d be better off if Uber classified them as employees.

Their reasons for thinking this way are quite valid.

As independent contractors, Uber drivers don’t enjoy the same benefits and security that employees get.

For starters, Uber drivers don’t get expense reimbursements for costs, such as maintenance, repair, and fuel costs. They also don’t get a pension plan or health insurance. Finally, they aren’t protected by federal and state laws regarding minimum wage and overtime pay.

They don’t have job stability too, because there’s no contract involved. Uber can terminate a driver at any time without justification.

Arguments for Employee Status

You may wonder if being considered employees will make Uber drivers better off.

We believe it would.

When classified as employees, Uber drivers will have the protection of minimum wage and overtime pay laws. They’ll also get more stability with pension plans and health insurance.

This isn’t to mention that the burden of maintenance and repair expenses will fall on Uber instead of its drivers.

Impact on the Gig Economy

The way Uber classifies and treats its drivers has a ripple effect on the gig economy as a whole.

By classifying its drivers as independent contractors and controlling their pay and work conditions, Uber sets a bad precedent that makes working in the gig economy less attractive.

This negative perception is amplified by Uber’s refusal to take on costs like unemployment insurance and worker’s compensation.

Recent Developments and Future Outlook

Some believe that the future outlook for Uber drivers is bleak, while others have a more positive position on the matter.

We can’t deny that Uber and other rideshare companies have created plenty of opportunities for drivers to boost their income.

Yet, Uber’s insistence on classifying drivers as independent contractors instead of employees keeps drivers’ earnings low and deprives them of the benefits they would get if they were considered employees.

A lot of people expect this issue to get worse in the future as more players enter the ridesharing market. This increased competition means that drivers will have to compete for rides, and this will reduce their earning potential.

On the flip side, others believe that as the industry becomes more mature, ridesharing companies will start paying drivers more and give them better benefits.

Ultimately, the fate of Uber drivers depends on how the legislation and regulations of ridesharing apps develop.

Frequently Asked Questions

Here are a couple of questions that people commonly have about the status of Uber drivers as employees vs independent contractors:

Are Uber drivers employees or independent contractors in South Africa?

Uber drivers in South Africa are currently considered independent contractors. This classification means that Uber drivers in South Africa aren’t entitled to the rights afforded to employees in the country, such as paid leave, and they could be terminated at any time.

Is Uber a freelance gig?

There’s a thin line between independent contractor status and freelancing, and Uber drivers toe that line. Yet, they’re in the first group. That applies if you drive people around or deliver food as an Uber Eats driver.

Wrapping Up

The debate about whether Uber drivers are independent contractors or employees has been going on ever since ridesharing apps came on the scene.

In most countries, Uber classifies drivers as independent contractors. The company refuses to give drivers employee status to avoid having to incur significant expenses and give drivers benefits like social security and health insurance.

This issue has been a topic of contention in legal circles for years. In some cases, countries have passed laws that force Uber to give drivers employee status. In others, such legislation doesn’t exist.

We’re anxious to see how this story develops in the future.

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