Uber’s business model depends upon drivers who aren’t employees. The transportation company itself has about 6,700 employees. It maintains that its 400,000 drivers in the US are independent contractors.
If Uber had to pay employment benefits for its drivers, the company would be in a far different financial situation from the one it’s in today.
Uber was sued in 2013 in California and Massachusetts because it classifies drivers as independent contractors rather than employees. That case was scheduled for trial in June of this year, but in April, Uber chose to settle for $100 million (or $84 million if the company does not go public), leaving the company’s characterization of its relationship with its drivers intact for the time being.
But the issue is far from settled. In June, a group representing Uber drivers in New York City filed a lawsuit against Uber challenging their status as independent contractors. Similar lawsuits are pending in Boston, and in states such as Indiana and Texas.
Smaller startups playing in the “gig economy" like Honor, Instacart, and Luxe have decided to pay employee benefits rather than risk a legal confrontation. Yet their caution limits positive aspects of working outside of the traditional employer-employee relationship, such as the freedom to set one’s own working hours.
For companies considering whether they can have a different kind of relationship with workers, it’s not clear whether Uber’s arrangement with its drivers has applicability for other organizations.
Yet, particularly in IT-oriented industries, there could be benefits to carving out a work relationship that falls somewhere between employee and independent contractor. Among IT professionals, it might be appealing to have working hours that flexed with the needs of a project, rather than being forced in advance to choose between the two traditional work models.