Legal Criteria . . . Employee, Contractor , or Violation Of The Law?

Uber, and Lyft both have class-actions before the Courts presently that are stuck with the task of rendering a decision whether Uber and Lyft drivers are employees or Independent Contractors. I think the Courts are in error already because they are trying to determine if the workers are one or the other instead of a third class of worker.

We all know the position of Independent Contractor has been used for years which converts an employee to his own small business and allows him to do a portion of theBrokeBusinessman company needs as though a business to business operation allowing the original company to save money by not having to participate in many of the required things paid for if the person an employee of the company. The company that employs the Independent Contractor is not obligated to pay taxes, unemployment, retirement, overtime, and other benefits normally paid to an employee, and the exclusion of these obligations can create substantial savings for the company. But, in order to employ an Independent Contractor you are still obligated to pay the Independent Contractor what it cost him to be an Independent Contractor plus a reasonable income to profit from the relationship. Failure to adequately provide for the Independent Contractor, means the Employer is not using an Independent Contractor to perform the work, but intentionally violating the Labor Laws of this Country by using people to perform their work without paying a legal wage for the work to be done.

Let’s look at this reasonably for a moment. A company has to pay an employee:

  • An hourly rate or salary
  • Unemployment
  • Workman’s Comp.
  • Employers share of taxes
  • Retirement
  • & other benefits such as medical & dental

An Independent Contractor is not supposed to make less than the equivalent employee, the savings to the employer is derived from not having to pay for the taxes and benefits of the regular employee.  The Fair Labor Standards Act  was written into law to provide employees certain rights as an employee and has been the standard employers have been required to meet for years. The is no provision in the FLSA that protects the Independent Contractor as the Independent Contractor is not an employee but becomes a Small Business providing services to the employer. I suggest that the writers of the FLSA had no intent that the employer be allowed to create an additional employment position that circumvents the FLSA. Criteria for use of Independent Contractors have to meet the test of if the position can actually perform the tasks hired for and act as a small business in doing so.

For a company to hire Independent Contractors to perform a task, the contractor has got to be compensated  for accordingly. This means the Independent Contractor has got to be paid sufficiently to:

  • Meet fair Market Value for the task ( this means the contractor gets hired at the same base rate as the equivalent employee. If the job pays an employee $10.00 per hour, the contractor also gets paid $10.00 per hour.
  • The Independent Contractor must meet his obligations that come with his compensation, for these obligations the contractor has to “mark-up” his pay from the employer,  this usually amounts to about 35% of the hourly rate. (Although the employer does not have to pay certain obligations because the contractor not an employee, the contractor still has to meet some of these obligations.
  • An Independent Contractor has to pay Self Employment Taxes which amounts to 25% of the rate paid by the employer. The  small business created by the employee becoming an Independent Contractor has obligations that it must meet such as business license and local taxation.
  • An Independent Contractor must be compensated for the expense incurred in doing the job.

emptypocketsFailure to compensate the Independent Contractor adequately for all of these provisions fails the use of Independent Contractors for performance of the task, but creates an unlawful employment position with intent to violate the requirements of the FLSA which is against the law. I am not an Attorney. I have no law degree. I am also not sufficiently trained to give legal advice to anyone. I am however a person of reasonable intelligence and common sense. Creation of an employment position that does not compensate a person adequately to meet the legal requirements of law is a gross violation of the intent of the FLSA and is illegal. An Independent Contractor must meet these criteria as the Independent Contractor himself is obligated to meet these requirements:

  • Minimum wage as required by law or equivalent employee rate.
  • Self Employment taxes on the wages
  • Expenses incurred in performing the task hired for
  • and costs of running the small business of being an Independent Contractor

Failure to compensate the Independent Contractor sufficiently for all of these obligations is not hiring an Independent Contractor to provide for a task be performed but an attempt to violate the  Labor Laws of this Country and as such are criminal acts punishable by law and every employer that violates such law needs to be prosecuted accordingly. Mind you, this is my opinion. Again, I am not qualified to advise other regarding the laws of this Country, but were I a Judge charged with the responsibility of rendering a decision of “employee vs. contractor” I would first ascertain the criteria of both positions and determine if either criteria met, or if other significant laws violated. People are under the impression that an employer can hire an Independent Contractor and pay the contractor anything they want to and still be legal. This is wrong, because the Independent Contractor  is then forced into the position of conspiring to violate the  law because even if the Employer can avoid some of the requirements of compensation to the employee by use of Independent Contractors, the Independent Contractor is still required by law to meet these obligations.

Recently, it has come to the attention of the City of San Francisco that Independent Contractors have not been meeting their obligation to acquire Small Business License and Tax Registration with the City. The bigger concern for the drivers not being compensated enough to make a legal payroll for themselves, is the increase in expense such will create that lessens their actual “pay”: for providing services to these companies. Myself as a driver, wonder how long these companies are going to get away with their “slave labor” tactics in an economy desperate for good jobs, while our Government sits on their collective thumbs watching these companies bloat at the top while creating nothing more than 300,000 poverty level jobs and gets away with it. It is as though the laws made to protect the American Worker have been manipulated to such a degree that the worker has no rights under the law. But, it is actually quite simple . . . If an employee is not an employee but an Independent Contractor, if he is not adequately compensated to perform as an Independent Contractor, then the position is illegal and a violation of Federal Labor Laws and is protected by every provision of the labor laws. So, where is the Government that is supposed to protect the American Worker? Where is the protection that is supposed to ensure the American Worker treated fairly? It is not an at will economy when it is an intentional act to circumvent labor laws, it is slavery in an economy that screams for good paying jobs and a negligence of government to allow it to continue.


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