Are Rideshare Drivers Considered Employees or Independent Contractors?

The classification of rideshare drivers—whether they are employees or independent contractors—remains one of the most hotly contested legal and political debates in the gig economy. For companies like Uber and Lyft, this distinction defines the foundation of their employment model. For drivers, it determines access to benefits such as minimum wage, overtime pay, health insurance, and workers compensation.

This issue has sparked extensive legal challenges in California and beyond, leading to major court rulings and legislative responses that continue to shape the future of app-based ride hailing and delivery services.

The Core of the Classification Debate

At the heart of the controversy is whether rideshare drivers perform work within the usual course of a company’s business, or if they operate independently with control over their schedules, routes, and customer interactions. Uber and Lyft drivers often use their own cars and manage their own working hours. These factors are often cited to justify their classification as independent contractors.

However, critics argue that these drivers are not economically independent and that the nature of their work aligns with the core function of the employer’s business. This raises concerns about fair compensation and a lack of employment benefits for those classified as independent contractors.

California’s Role: The ABC Test and Assembly Bill 5

California has been at the center of this issue, especially following the California Supreme Court’s landmark decision in Dynamex Operations West, Inc. v. Superior Court, which introduced the ABC test. Under this test, a worker is presumed to be an employee unless the company can prove:

1. The worker is free from control and direction in performing the work;
   
2. The work is performed outside the usual course of the company’s business;
   
3. The worker is engaged in an independently established trade or occupation.
   

To codify this standard, California passed Assembly Bill 5 (AB5), directly impacting Uber and Lyft drivers, as well as other gig workers. Under AB5, many app-based drivers would no longer meet the test for independent contractor status and would instead be considered employees.

Uber and Lyft’s Response: Ballot Initiatives and Business Model Shifts

In response to AB5 and other legislation, Uber and Lyft backed Proposition 22, a California ballot initiative that carved out a special classification for app-based drivers. This measure allows drivers to retain some flexibility while offering limited benefits, such as a minimum earnings guarantee and partial health insurance subsidies, but it avoids full employee classification.

While Proposition 22 passed, it was later ruled unconstitutional by a California court, leading to more legal uncertainty. The California Supreme Court may ultimately determine the fate of these employment models and whether gig workers are entitled to the full suite of protections offered to employees under labor laws and the Fair Labor Standards Act.

Employee vs. Independent Contractor: Why It Matters

Whether drivers are considered employees or not independent contractors has a major impact on:

• Eligibility for minimum wage and overtime pay
  
• Access to health insurance and paid sick leave
  
• Employer contributions to workers compensation and unemployment insurance
  
• Legal rights under state and federal labor laws
  

Rideshare drivers classified as employees may be entitled to greater workplace protections and financial security. Conversely, those considered independent contractors shoulder more responsibility for expenses like car maintenance, insurance, and taxes, without guarantees of consistent income or employment benefits.

Lyft and Uber Drivers Nationwide

Although California has taken the lead in addressing worker classification, the legal conversation extends nationwide. Other states are now evaluating whether to adopt similar laws or create new standards. Rideshare drivers across the country—many of whom rely on these platforms for supplemental income or full-time work—are affected by how companies classify workers.

In places like San Francisco and Los Angeles, where the rideshare industry is especially active, legal analysis around classification continues to evolve. Whether drivers are part of an independently established trade or perform duties central to a company’s business will likely remain the focal point of litigation and legislation.

The Bigger Picture: Gig Workers and the Future of Employment

Rideshare drivers are part of a broader category of gig workers that includes delivery drivers, freelance laborers, and app-based service providers. As tech giants and delivery companies increasingly rely on flexible labor models, the conversation around worker classification becomes even more urgent.

The challenge lies in balancing flexibility with fairness—ensuring workers have a meaningful opportunity to earn a living while receiving protections consistent with their roles. State legislatures and courts will continue to examine this balance, determining how to classify workers in a changing economy.

Learn more about whether rideshare drivers are considered employees or independent contractors. Call Greenstein & Pittari, LLP at (800) 842-8462 to schedule your free, no-obligation consultation. You can also reach us anytime through our contact page. Let us help you take the first step toward justice and fair compensation.

FAQs: Are Rideshare Drivers Employees or Independent Contractors?

Are Uber and Lyft drivers employees or independent contractors in California?
Currently, most Uber and Lyft drivers in California are classified as independent contractors, but ongoing legal challenges may change that. Proposition 22 attempted to provide a third category of classification, but it has faced judicial review.

What is the ABC test in California?
The ABC test is a three-part standard used to determine whether a worker is an employee or an independent contractor. It is codified under California law and strongly favors employee classification unless the company can prove all three parts of the test.

Why does it matter if a rideshare driver is an employee?
Employees are entitled to minimum wage, overtime pay, health insurance, paid sick leave, and other benefits. Independent contractors are not, which affects long-term financial security and legal rights.

Do Uber and Lyft provide benefits to drivers?
Only to a limited extent. Under Proposition 22, some drivers receive partial benefits, such as subsidies for health insurance and mileage reimbursement, but they still lack full employment protections.

Can drivers be both independent and part of the employer’s business?
This is one of the key questions courts are addressing. If a driver performs tasks that are of the same nature as the company’s business, they may be considered employees under labor laws.

What benefits are rideshare drivers asking for?
Many drivers are seeking fair wages, paid sick leave, access to health insurance, and protections under workplace injury laws like workers compensation.