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U.S. Labor Department Says Uber, Lyft Drivers are Employees

Motor Trend logo Motor Trend 7/16/2015 Kelly Pleskot

A month after California ruled an Uber driver was an employee and not a contractor, the U.S. Department of Labor is weighing in on the issue. In a 15-page document, the department suggests companies should take a broader approach to defining an employee, a stance that could spell trouble for ride-sharing services like Uber and Lyft.

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The directive says that a worker who is "economically dependent" on the employer should be treated as an employee. Only those who are in business for themselves should be designated as independent contractors. Even if both parties agree for the worker to act as a contractor, that agreement "is not relevant" to the classification question.

The Labor Department's memo issued this week doesn't have the force of law, but is meant to clarify how we should interpret the Fair Labor Standards Act and the way it differentiates between employees and contractors. Thus, it can be used in the future by courts of law when ruling on these types of issues.

The document could have implications for Uber, which is currently appealing California's ruling that deemed one driver an employee of the company. The courts awarded over $4,000 to the driver saying she was entitled to mileage expenses for using her personal car for work purposes. Although the ruling only applied to the individual driver and not to all Uber workers, the legislation could pave the way toward companies covering Social Security, healthcare, and a wide variety of other benefits for their workers. Now that the U.S. has clarified its stance on the issue, this future is looking even more likely for Uber.

Challenges are nothing new for the young ride-sharing service, however. The company had shut down operations in Kansas earlier this year over questions about background checks for drivers. Meanwhile, police detained two Uber executives in France where prosecutors argued that drivers need professional licenses. Uber also faced legal battles in Germany last year when courts said drivers don't have the proper permits or insurance to operate its kind of service.

Source: AP

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