Uber Drivers Found to be Employees Should be a Cautionary Tale for Business Owners

The Third Department recently affirmed the Unemployment Insurance Appeal Board’s determination that Uber drivers are employees entitled to unemployment insurance benefits. This case may be problematic to businesses who currently utilize similar control over independent contractors because it also means that such individuals are considered employees under the law.


The Third Department’s reasoning in Matter of Lowry (Uber Tech., Inc–Commissioner of Labor), 2020 NY Slip Op 07645, Third Dept 12-17-20 was that Uber controls the drivers’ access to their customers, calculates and collects the fares and sets the drivers’ rate of compensation. Drivers may choose the route to take in transporting customers, but Uber provides a navigation system, tracks the drivers’ location on the app throughout the trip and reserves the right to adjust the fare if the drivers take an inefficient route. Uber also controls the vehicle used, precludes certain driver behavior, and uses its rating system to encourage and promote drivers to conduct themselves in a way that maintains “a positive environment” and “a fun atmosphere in the car.” Thus, the Unemployment Insurance Appeal Board’s finding of an employment relationship was affirmed.


Based on this new precedent, we recommend businesses take a second look at their independent contractor agreements and the amount of control the business exercises over its independent contractors to ensure that there is no potential for such individuals to be deemed employees versus independent contractors. Failing to properly classify an individual as an independent contractor can result in expensive penalties to business owners through the United States Department of Labor and the Internal Revenue Service.

To assist with the increasing issue of misclassification, the IRS recommends employers file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes, and Income Tax Withholding, to determine to whether a worker is an employee or independent contractor. Form SS-8 can be found here: https://www.irs.gov/forms-pubs/about-form-ss-8


Our Firm has extensive experience counseling employers and businesses on employee and labor law issues, and preparing applicable employee policies, particularly relating to the evolving regulations during the COVID-19 pandemic. If you have any questions related to this Legal Briefing or questions related to COVID-19 reopening rules and procedures, please contact any member of our Firm at 585-730-4773.

This Legal Briefing is intended for general informational and educational purposes only and should not be considered legal advice or counsel. The substance of this Legal Briefing is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. © 2020 Law Offices of Pullano & Farrow PLLC

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