By managing partner Samuel H. Pond, PA Law Weekly.
A few months ago, Uber and Lyft drivers around the world went on a 24-hour strike to protest unfair pay, the lack of transparency in the ride-hailing giants’ fare systems, poor working conditions and the lack of benefits.
The protests came just before Uber’s much-anticipated May 10 initial public offering. The strike was timed to grab headlines and bring awareness to the plight of drivers. Uber and Lyft, like other businesses in the so-called “gig economy,” classify their workers as independent contractors, making them ineligible for the benefits of traditional employment, like health insurance, paid time off or workers’ compensation.
While these gig opportunities have given workers greater flexibility, the independent classification has left gig workers vulnerable to exploitation. The distinction of employee versus independent contractor is particularly important in the realm of workers’ compensation. Gig workers designated as independent contractors who are injured on the job would not be able to rely on the workers’ compensation system for reimbursement of medical expenses and lost wages.
Rise of the Gig Workforce
Technology has brought vast changes to the workforce. Jobs in the so-called gig economy usually require workers to connect with customers through a digital platform. More and more businesses in the gig economy are relying on temporary and semi-independent workers, which those businesses classify as independent contractors, to deliver services. This has created plentiful and available flexible work opportunities for those seeking freedom from 9-to-5 jobs.
This is the business model that Uber, Uber Eats, Lyft, Caviar, Postmates, Task Rabbit, DoorDash, Grubhub and others use to deliver their services. Typically, those businesses rationalize their independent contractor designations by alleging that drivers are “customers” who use the tech platforms to find their customers. Of course, this tangled logic ignores that the drivers cannot set the prices or terms for their work.
The business model relies on designating labor as independent contractors to avoid paying employment taxes and employee benefits, keeping the gig economy businesses profitable. But those profits are built on the backs of a workforce that have given away their basic rights in exchange for flexibility.
Cut Out of the ‘Grand Bargain’
The Pennsylvania workers’ compensation system was born in 1915, with workers exchanging their state constitutional right to sue their employers in tort in return for the guarantee of benefits covering lost wages and medical expenses. The system established a no-fault basis for injuries and a quicker administrative framework to provide recovery for injured workers.
The Workers’ Compensation Act applies to all injuries or occupational diseases occurring during the course and scope of employment that are related to that work. The Pennsylvania law provides the following benefits:
- Lost wages for missed work—2/3 of the worker’s average weekly wage.
- Medical expenses reasonable to treat the injury or illness.
- Benefits to cover a specific loss such as a limb or the ability to use it.
- Payment for severe disfigurement or scars.
- Coverage for participation in certain physical or vocational rehabilitation programs.
- Death benefits such as payment of burial expenses.
However, the act requires an employment arrangement to exist to be covered by the law’s protections. Gig economy workers who are classified as independent contractors have been squeezed out of the workers’ compensation system.
The truth is that gig economy jobs tend to be riskier than traditional employment. Many involve driving and transportation services, which are inherently more dangerous. A 2018 study by University College London surveyed drivers and couriers who picked up work using apps. According to the study, 42% said they had damaged their vehicle in a collision while working and 10% said there had been an accident involving injury to someone. Three-quarters of the respondents said there had been occasions while working where they had to take evasive action to avoid a crash.
The study also found added risk factors with such jobs, including time pressure and distraction caused by having to interact with the apps while working.
In May of last year in Philadelphia, a 34-year-old bike courier for the food-order service Caviar was struck and killed by an SUV while delivering food during a rainstorm. A June 2018 article about the incident reported that Caviar’s incentive program encouraged couriers to work during peak times and in bad weather, increasing the risks on workers. Because the courier was classified as an independent contractor, his family received no workers’ compensation benefits.
Incidents like the May 2018 tragedy have resulted in a ramping up of efforts to organize gig workers, but most of those efforts have so far failed to produce tangible results like higher wages, better working conditions, health benefits and injury compensation.
Challenges Pending
Lawsuits have been filed around the country to challenge the classification of gig workers, with mixed results. Currently in the U.S. Court of Appeals for the Third Circuit, a lawsuit is pending filed by three Philadelphia drivers for UberBlack, the ride-sharing giant’s limousine service. The drivers asserted violations of the federal Fair Labor Standards Act, the Pennsylvania Minimum Wage Act and the Pennsylvania Wage Payment and Collection Law.
In April 2018, U.S. District Judge Michael Baylson of the Eastern District of Pennsylvania granted summary judgement to Uber in Razak v. Uber Technologies, No. 2:16-cv-00573 (E.D. Pa. April 11, 2018). He applied the six-factor test from Donovan v. DialAmerica Marketing,757 F.2d 1376 (3d Cir. 1985), to determine whether an employment relationship exists. Those factors are:
- The degree of the alleged employer’s right to control the manner in which the work is to be performed.
- The alleged employee’s opportunity for profit or loss depending upon his managerial skill.
- The alleged employee’s investment in equipment or materials required for his task, or his employment of helpers.
- Whether the service rendered requires a special skill.
- The degree of permanence of the working relationship.
- Whether the service rendered is an integral part of the alleged employer’s business.
Judge Baylson found that most of the factors weighed heavily in favor of an independent contractor status. He said that given the totality of the circumstances, the drivers have not raised sufficient proof to meet the burden showing they are employees.
The drivers appealed to the Third Circuit, which heard the case in January. The decision is still pending. Uber, meanwhile, has taken the challenge seriously. In a registration statement filed with the U.S. Securities and Exchange Commission in conjunction with its IPO, Uber listed the Razak suit as a threat to its business model.
“Our business would be adversely affected if drivers were classified as employees instead of independent contractors,” the company said. “Any such reclassification would require us to fundamentally change our business model, and consequently have an adverse effect on our business and financial condition.”
Insurance That Falls Short of Workers’ Comp
Meanwhile, Uber began piloting a program in 2017 to provide drivers with insurance to cover lost wages and medical expenses resulting from injuries on the job. The driver injury protection program could be a blueprint for other gig economy employers. However, the company stresses that the program is not workers’ compensation and the policy terms make it obvious that the coverage falls far short of workers’ compensation benefits.
There are a few major distinctions between the Uber insurance program and traditional workers’ compensation. Primarily, the Uber program is voluntary for workers, who must pay for the policy out of their own pockets. Workers’ compensation, on the other hand, is mandatory, with employers required to foot the bill.
According to a June 2017 report by the Intercept, there are other differences as well. For instance, workers’ compensation cases are adjudicated by administrative law judges appointed by the state, with the decisions appealable to a state-appointed board and eventually the courts. The Intercept reports that the Uber policies appear to allow the insurer to deny coverage at the discretion of their own doctors.
In addition, while workers’ compensation in Pennsylvania provides up to two-thirds of a worker’s salary in wage loss benefits, the Uber policies max out at one-half, The Intercept reports.
Still Vulnerable
Gig workers remain exposed to potential disaster while they work for Uber, Lyft and other apps. So far, the courts and legislation have failed to protect them. The early May strike probably will not provide much in tangible results. The drivers returned to work the next day, just as Uber’s stock went public.
Still, the strike signals that organization efforts are picking up, but they have yet to do much more than raise awareness to the workers’ plight. For now, one thing is certain—gig economy workers have sacrificed much of their rights in return for job flexibility.
