Uber, Lyft business models threatened by lawsuits

From Business Insider — Maya Kosoff writes about two lawsuits that may require Uber and Lyft to change the way they do business. Both Uber and Lyft consider their drivers to be independent contractors. These lawsuits could result in both Uber and Lyft having to reclassify their workers as employees. Maya writes:

“Both Uber and Lyft are facing lawsuits that could dramatically change both companies’ business models, Reuters reports.

Both lawsuits, which were separately brought on by drivers for the two companies, say the companies’ drivers should be reclassified as employees as opposed to independent contractors.

The difference between the two, according to the IRS, is that for common-law employees, employers “must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid.”

The same is not necessarily true for an independent contractor.

Benefits are another aspect often extended to employees but not independent contractors. And employers but not independent contractors have the right to control how a worker behaves — how to dress, for example, or specific customer-interaction protocol. You have more labor protections when you’re an employee.

As independent contractors for Lyft and Uber, drivers pay all their expenses out of pocket: gas, maintenance, insurance, and detailing, just to name a few.

The drivers, should they win these lawsuits, could be entitled to either hourly wages or a regular salary, as well as reimbursement for the money they’ve spent on things like gas and insurance as drivers for Uber and Lyft.

“If the judges rule against Uber and Lyft, it could significantly raise their costs beyond the lawsuits and force the companies to pay social se

curity, workers’ compensation, and unemployment insurance,” Reuters reports…..”

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