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BERKELEY, Calif. May 7, 2020 – A new report from the U.C. Berkeley Labor Center finds that if transportation network companies (TNC) Uber and Lyft had classified their drivers as employees they would have paid $413 million into California’s Unemployment Insurance Fund between 2014 and 2019. The findings come as hundreds of thousands of gig workers lost work as a result of the COVID-19 pandemic, and a lawsuit against the two companies by California Attorney General Xavier Becerra over mis-classification of the drivers as independent contractors.
Report authors Ken Jacobs and Michael Reich examined a number of available datasets to divide the state’s 640,000 rideshare drivers into two groups: those paid less than the $7,000 taxable wage limit and those paid more. Applying the 3.4 percent tax rate to each group yielded $413 million in missing UI payments over five years.
“By not paying into the State Unemployment Insurance Fund, the rideshare companies are effectively shifting costs onto the drivers and onto the public,” said Ken Jacobs, Chair of the UC Berkeley Labor Center and co-author of the brief. “We were careful to account for drivers who worked for more than one platform in any single month over the five year period,” said Professor Michael Reich, Co-Chair of the Center on Wage and Employment Dynamics at UC Berkeley, and the other co-author of the brief.
Independent contractors may be eligible for federal Pandemic Unemployment Assistance, but the report finds that more than three-quarters of the drivers are unlikely to qualify.
Uber, Lyft, and other TNCs have long misclassified their drivers as independent contractors instead of employees, and have not paid into California’s unemployment fund since their beginning. They have continued to classify their workers this way, despite Department of Labor Standards rulings against them, a 2018 California State Supreme Court decision that established stricter rules to determine who is an employees and who is an independent contractor, and a 2019 state law that applied those rules to California’s Unemployment Insurance Code.
Click here to read the full brief.
The Center for Labor Research and Education (Labor Center) and Center for Wage and Employment Dynamics (CWED) are projects of the Institute for Research on Labor and Employment (IRLE) at UC Berkeley. IRLE connects world-class research with policy to improve workers’ lives, communities, and society.