Pennsylvania Supreme Court Rules Gig Workers Are Not Self-Employed

On July 24, 2020, the Pennsylvania Supreme Court ruled that Uber drivers are not self-employed. The Court found that Uber drivers are, “as a matter of law,” controlled by Uber. The majority opinion, written by Justice Kevin Dougherty and backed by four justices, says that Uber drivers are not self-employed, but rather, that “Uber controlled and directed the performance of. . . services as a driver-for-hire.”

The Story

The suit, Lowman vs. Unemployment Compensation Board of Review, came to light in 2015 when Donald Lowman Jr. found out that he no longer would be eligible for unemployment benefits because he had been driving for Uber. Mr. Lowman, who had lost his job as a behavior health specialist, was “self-employed,” according to Pennsylvania’s Department of Labor and Industry, which meant he was disqualified from collecting unemployment. A state unemployment board had originally found in 2016 that Mr. Lowman was an independent contractor for Uber and was ineligible for payments.

The justices ruled in a 5-2 vote that the Uber driver was not engaging in an independently established business when driving for the ride share company. 

The Decision

The ruling dismissed many of the arguments ordinarily used by gig companies to classify app workers as “self-employed” independent contractors. While drivers can refuse assignments, Uber can also kick drivers off of the app if they decline too many rides. Moreover, drivers also do not set their own compensation, nor do drivers build their own client base. The court also swiftly addressed and rejected the argument that, because Uber drivers set their own hours, they are independent of the company.

The ruling in Lowman is pivotal, as it can be used as precedent in new legal cases. While the decision will not automatically make app-based gig workers eligible for unemployment benefits, if they are denied, it gives workers strong legal ground to appeal and prove that they are entitled to them.

Why Employment Classification is Important

When it comes to determining employment rights and responsibilities, the most important factor is the definition of employer and employee. Some employers run into trouble when they classify workers as independent contractors instead of employees. When an employee is misclassified as an independent contractor, it can create an undue burden on several fronts. There is recourse, however, for employees who have been misclassified as independent contractors. Whether a misclassification has occurred turns on a complex set of legal factors, including how workers receive and complete tasks.

Key Differences Between Independent Contractors and Employees

An independent contractor generally enjoys far more autonomy than an employee. Independent contractors have the discretion to accept or deny an assignment as they see fit, they may set their own schedule, and frequently will provide their services to more than one company at the same time.

Conversely, employees provide their services at the direction of the employer. Unlike the independent contractor, employees lack the ability to make their own schedule, primarily report to their employer’s place of business during regularly scheduled business hours, and rarely perform similar services for another employer simultaneously.

The two classifications also differ in their tax treatment and overtime treatment. An independent contractor will not have any tax or FICA withholding, unlike an employee. Moreover, independent contractors are paid in accordance with the terms of their contract, and are therefore not entitled to overtime pay. Conversely, employees who are not managers or supervisors are entitled to overtime pay when working in excess of 40 hours in a given work week.

Individuals classified as independent contractors are also not afforded the same benefits as employees, as is demonstrated in Lowman. They receive no employment benefits, such as health and disability insurance. Additionally, independent contractors cannot seek unemployment benefits and also cannot file a workers’ compensation claim if they are injured on the job. They also enjoy far less protection from unfair work practices than an employee and may not avail themselves of state and federal anti-discrimination and workplace safety laws.

Contact Our Employment Law Attorneys For A Free Consultation

At McOmber McOmber & Luber, we take a proactive approach to each and every legal issue our clients face, helping both employers and employees with legal areas including employment misclassification, discrimination, litigation, whistleblowing, and retaliation issues. Please call our Red Bank office at 732-842-6500, our Marlton office at 856-985-9800, our Newark office at 973-878-9040, or contact us at 888-396-0736 or online for a free consultation. We represent clients throughout New Jersey.