“Arguably, the biggest legal challenge that gig employers face is the classification of their workers as independent contractors or as employees,” Wajert [Emily M. Wajert, an associate at Kramer Levin Naftalis & Frankel] said. “This can be really difficult for gig employers to figure out because classification tests vary not only from state to state but also sometimes within states.”
Wajert outlined two different classification tests: the economic realities test, which is used by the U.S. Department of Labor, and the ABC Test, which California adopted just last year in a court decision that sparked controversy.
The economic realities test looks at six factors to classify a worker: integrality, managerial skill, relative investment, special skill, permanence of relationship, and degree of control. But these elements are not always weighed equally.
In Razak v. Uber Techs., Judge Michael Baylson of the U.S. District Court for the Eastern District of Pennsylvania held that UberBlack drivers were independent contractors despite them only meeting four out of the six criteria. The other two factors, integrality and special skill, were less significant to the judge.
On the other hand, the ABC Test has only three prongs. Courts and agencies look at freedom from control, service outside usual course of business, and independent trade. These factors rely on the presumption that independent contractors are not integral to the company while employees are.
“This is problematic because, of course, the work that their workers do is an essential part of their business model,” Wajert said.
In response to the case that established the ABC Test in California, Dynamex Operations West Inc. v. Superior Court of Los Angeles County, major gig economy players—such as Uber, Lyft, Instacart and DoorDash—wrote a letter to the legislature opposing the decision, although nothing has been changed yet.
Read the full story at How Uber, Postmates, DoorDash and the gig economy are disrupting the legal industry