Uber Driving: Freelance Opportunity or Company Employment?

by on February 9, 2018

uber driving

Have you thought about getting into the Uber driving craze? I’m pretty sure you’ve seen all their advertisements on Facebook and other Social Media channels talking about the amount of money you can make as an Uber driver.

Before you jump into this Uber driving opportunity and make this decision, you may want to do your homework first.  You should also visit their getting started with Uber business website page.

Uber driving: Freelancers or Independent Contractors?

Freelancer is a term generally used to describe a person who and is not officially obligated to a specific long-term employer. Usually, this is their only source of income, claims self-employment on their taxes.

They usually work on a contract basis for multiple companies or persons, all on a short-term basis either as a temporary team member or an individual.

Since freelancers are considered to be self-employed, especially for tax purposes, they do not have the advantage of payroll deductions or group health.  Neither do they have the same job security that long-term employment can provide nor the sense of belonging that often develops in close-knit employee groups.

What they do have is a higher tax rate since they have to pay the full amount that is usually covered by an employer, but they also:

  • Have the freedom to pick and choose their projects.
  • Decide what companies they would like to work with.
  • Have control over their own schedule.
  • Rarely have to deal with office gossip! (Even though some would consider that a con, for the sake of this article we’ll consider it a pro).

To be designated as an independent contractor, an individual must be free to determine how the work will be done to completion, free from the client/company’s control. In other words, the freelancer decides how the work will get done, not the company.

Additionally, unlike an employee who may receive training, a contractor already has the knowledge to complete a project and is responsible for the final product only as far as the terms of their contract requires.

So, what is Uber?

Based out of San Francisco, Uber started around 2010 with a business plan that was considered by many to be a brilliant solution to a common problem, getting a ride.  To solve this problem, they came up with the concept of getting a ride at the push of a button, or more precisely, with the help of an App.  In late 2015, they hit one billion trips, doubling that number only six months later. Wow!

Right from the starting block, Uber claimed that the drivers using the Uber app are independent contractors, who enjoy all the flexibility and freedom that comes with self-employment.  The implication being that drivers using the App could maintain a healthy income just by driving with Uber.  For many drivers, this was the case and it has spread worldwide.

According to reports in the United Kingdom, Uber has become just as popular overseas, reporting that in London alone, tens of thousands of people drive with Uber precisely because they want to be self-employed and be their own boss, keeping the freedom and flexibility of being able to drive when and where they want.

The company claims it functions as a digital marketplace with the purpose of connecting self-employed business owners (drivers) with customers (riders) while collecting a fee for making the introduction.

Drivers must sign a contract that says they’re independent contractors, not employees before they can take any passengers.

Apparently, not all drivers or regulators see working for the company the same way Uber does.

Various services it has proposed have been banned in some countries and it faces numerous battles in the U.S. and overseas courts over labor standards, safety rules, and pricing policies.

The Florida Department of Revenue recently awarded the status of an employee for the benefit of unemployment to two different drivers.  Uber had refused to pay unemployment because, in accordance with their business model, drivers aren’t considered employees

The status of employ was given, however, due to the fact that Uber drivers get paid commissions and bonuses, do not bill Uber for their time, and have been told when, where and how to do the work by Uber. They also received Uber driving training.

Each of these is considered to be a means of control by the company.

Naturally, the Florida ruling has drawn national attention.  This kind of thing is bound to happen when a company has a multibillion-dollar estimated value and more than 400,000 drivers across the U.S. alone. Similar decisions affecting the classification of Uber drivers continue to pop up, as with the New York State Labor Department, who awarded jobless benefits to former Uber drivers as well.

Remember all those drivers in London?  A panel of employment tribunal judges in the UK ruled that Uber drivers should not be considered freelance, but instead should be paid a living wage. Uber says it plans on appealing that decision.

Still, more controversy entered courtesy of Suva, an entity that provides requisite on-the-job accident insurance in Switzerland and helps decide which workers are freelance.  They found in favor of an Uber Technology driver as staff because he faced consequences if he broke Uber rules and could not set prices and payment terms independently.

Suva did report that this case concerned a particular driver who had sought to clarify his status and was not a general ruling on Uber’s business model. “For us, it is not about the company but about the person involved.”

Uber’s response?  “Taxi dispatchers have had exactly this issue for years and yet today there is not one driver “employed” by a big dispatcher in cities such as Zurich or Geneva. So, this is nothing new in Switzerland and we will challenge it, just as others have.”

These cases will probably open Uber up to even more claims from thousands of drivers in the U.S. and other countries, as well as have implications for other companies with similar business plans.

If all drivers had to eventually be treated as employees, the extra costs could easily threaten this new type of business model. The company has appealed the rulings and even offered one driver $5,000 to drop the claim.

David Plouffe, a strategist with the company, gave a speech specifically talking about today’s concept of work and freelancing, “I want to talk today about the future of work—specifically, the fact that a growing number of people are engaging in flexible and freelance job because of the sharing economy or through on-demand platforms…Uber currently has 1.1 million active drivers on the platform globally.

Here in the U.S., there are more than 400,000 active drivers taking at least four trips a month…The numbers show just how attractive this Uber driving type of work is to people around the country.”

Plouffe’s statement went on to relate, that Uber generally only provides extra income for the broadening number of part-time workers in the market today who need the flexibility or extra cash and that often they are using the App while in between jobs.

He went on to say that for most people, Uber driving is not even a part-time job, it’s merely driving 1-2 hours a day to help pay the bills. It was noted that about half the drivers work less than 10 hours a week and even then, significantly adjust their schedules week to week to work around other employment.

So, for now, Uber will continue to classify their drivers as independent contractors, and dispute claims as they arise because their entire business model depends on it.

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