Uber’s Class Action Suit- And Why It Matters
Earlier this week, a federal judge in California certified class action status for a lawsuit by Uber drivers demanding they be reclassified as employees, rather than independent contractors. Although Uber had tried to cover this base by amending its contract agreements with drivers so that they waive the right to class action status, enough drivers were still operating under the old agreements that more than 15,000 of them are now part of the certified class demanding relief. The suit is expected to go to trial sometime next year.
Why do we care about this at Graphite? And why should our clients and contract professionals care?
Arguably, the kind of work performed through our staffing platform is nothing like taxi driving. And we haven’t heard any rumblings of discontent on either side, regarding the professionals’ legal status as contractors. Most are hired for short term, temporary projects and if they eventually turn into long term employment arrangements, we assume their individual arrangements conform with applicable labor laws. Finally, the nature of the work they perform is much too variable to be able to class anyone into a single employment category.
But here’s why we care – and why you should too.
It’s a trend that will affect all of us, eventually. As the Freelance Economy continues to outpace the rate of regular job growth, Congress as well as state legislatures will begin to respond to the sheer numbers of affected taxpayers. Consider the question of tax returns. The W-2 wage withholding system is relatively efficient when it comes to correctly reporting amounts; the intermittent nature of 1099 reporting is more prone to errors and omissions on both sides – contractor and employer. We’ll need a more efficient reporting system so all that independent income gets correctly accounted for on the tax rolls. If you’re planning to run your whole business using contractors rather than employees, be sure you have a great accounting system to track payments. Ditto if you’re planning to earn all your income this year from freelancing.
Another burning question is the erosion of worker protections that have become part of our social fabric: disability leave, workers compensation, and even Social Security. Freelancers calculate their 15.3% self-employment tax only after they’ve been able to expense off as much of their income as they can to reduce their tax bills. In other words, they’re incentivized to minimize contributions to their own accounts…shrinking their safety net.
As a company that brokers freelance work, we would love to be part of any conversation to address this need and explore solutions that make sense for everyone. We’re not Uber, and nobody is suing us. It’s about being proactive in a brave new world.