Uber, Lyft, Postmates, Rover, Airbnb – you’re probably familiar with all of these companies and may use some of them frequently. The “gig economy” established an entirely new market of accessible and convenient rides, food delivery, and other services that are available via smartphone apps. For customers, these businesses are a way to get what they need more quickly than ever before. And for many workers, this new model is viewed as a way to earn a living, or some additional cash, on their own schedule.
Unfortunately, many people who participate in the gig economy as workers have realized that the structure is not as beneficial as it originally seemed. These workers, who are considered “independent contractors” rather than fully-established employees, are not covered by the labor protections established in the Fair Labor Standards Act (FLSA).
The federal Fair Labor Standards Act, or FLSA, among its other regulations, establishes a federal minimum wage rate and states that employees who work overtime (i.e. over 40 hours in a week) must be paid for those hours at an amount that is equivalent to 1.5 times their typical regular rate. Gig economy workers who are independent contractors rather than employees are not entitled to the protections set forth by the FLSA, and companies can pay them at a rate they establish. In the gig economy, many workers are paid on a piece rate basis. To use the rideshare model as an example, drivers are paid per ride rather than per hour.
The cost of an Uber or Lyft ride is calculated on a per-minute basis in addition to booking fees and other charges. Drivers do not receive the whole of what the customer pays — the rideshare companies take their own commission from the price, leaving drivers with the remainder. Uber and Lyft’s commission percentages are not regulated, and can amount to approximately 50% of the total fare for some rides. Gig economy workers around the country have been protesting their independent contractor classification with the hopes of earning benefits and fairer wages.
However, it is worth noting that simply labeling a worker an “independent contractor” does not necessarily mean he or she is an independent contractor under the law. Many companies misclassify their workers as independent contractors to avoid paying minimum wage and overtime. If you have questions about whether you have been misclassified as an independent contractor rather than an employee, please contact one of our attorneys today.
The Fair Labor Standards Act provides employees with protection against unfair payment practices. Contact Donati Law, PLLC if your employer violated your worker rights under the FLSA.