One of the more interesting and challenging issues to surface is the status of drivers at transportation network companies (TNCs) such as Uber and Lyft. Are some or all of them employees? A federal court in California just ruled that this issue may be resolved in a class action (although this is subject to appeal).
That, alone, is a difficult call. Here are two web sites discussing the issue.
Commentary addressing this issue has focused primarily on the added expense created by employee status. "For an employer, the main difference between contractors and W-2 employees is that employers have to 'withhold income taxes, withhold and pay Social Security and Medicare taxes and pay unemployment tax on wages paid to an employee,'" according to the Internal Revenue Service.
Apart from these added expenses, status as an employee creates some difficult insurance challenges. Here a few:
--If you write a workers' compensation policy for the TNC's employees, how many employees are you insuring? Only those who work in the office, or the hundreds or thousands of drivers on the road?
--Most statutes or regulations covering TNCs such as Uber and Lyft require them to carry insurance on their drivers in various amounts -- e.g., $1 million from from the time of agreeing on a ride to after the dropoff. Usually, there is a lower amount required for the time the driver is cruising with the app on looking to connect with a fare ($50,000 primary and $200,000 "excess" in California).
If the driver is an employee, these limits become largely irrelevant because the TNC, as the employer, is liable without limit for any injuries caused by an employee driving within the scope of employment. Put another way, the injuries are backed by all of the TNC's assets, including any insurance it may carry.
--But the issue is more complex than that. What if the driver has a collision on the way to the city, but before turning on the app? Usually, when one is going to or coming from work, the commute is not considered to be in the scope of employment - i.e., no liability on the part of the employer. This "going and coming" rule changes, however, when the employee must use her car in the work. Obviously, TNC drivers must use their cars.
Take the case of Judy Bamberger. She used her car during work to visit clients and carry out other work-related chores. On her way home, she decided to stop for yoga and yogurt. As she made a left turn, she collided with a motorcyclist. Is the employer responsible? "Yes," said the California Court of Appeal. In Moradi v. Marsh USA, Inc., 210 Cal. App.4th 886 (2013), the court held that her driving fell within the scope of her employment because, since she used her car in her work, going to and from work conferred an "incidental benefit" on the employer.
Thus, the TNCs' liability may extend well beyond the "app on-app off" brackets.
--If this is not complex enough, consider this. Many drivers keep several apps on as they cruise. If a driver keeps three apps on and has a collision, is the driver an employee of all three TNCs? Does that change once the driver accepts a fare? What about the going and coming rule? If the app is not yet turned on, is the driver an employee of each company for whom the driver has an arrangement to drive?
One may imagine other "shared economy" scenarios where status as an employee will affect not only expenses line benefits, but also liability and related insurance issues.