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Employee or Contractor? An In-Depth Look at Uber and Lyft

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Craig Smalley

I’ve been following the class-action lawsuit by Uber drivers who are suing Uber Technologies Inc. over their perceived employee status, and are attempting to nail down an hourly wage and overtime. The main lawsuit was filed in California, but drivers in Florida, Illinois, and Massachusetts have also filed a similar, nationwide class-action lawsuit against the ride-sharing company.

Uber drivers say the San Francisco-based company violated the Fair Labor Standards Act and are seeking to recover unpaid overtime wages and work-related expenses. The lawsuit filed in the US District Court of the Northern District of Illinois goes a step further and tries to recover tips that were “earned but stolen by Uber, or were lost due to [Uber’s] communications and policies.”

I have an interest in this story because if these drivers are deemed employees, the next organization with its hands out will certainly be the IRS.

As far as the IRS is concerned, an employee and employer relationship is entered when an employer exerts control over its employee. There are different tests that the IRS uses, but it all boils down to control. When I decided to write this article, I concluded that I would either have to interview drivers or become one myself. I ended up doing both.

I have a good friend, who I will call “Ryan” for this article, who drives for both Uber and Lyft. By day, he has a very successful job in the telecommunications industry, makes good money, and has great benefits. I didn’t understand why he drove for Uber and Lyft.

Ryan is part of a union at his telecommunications job and thought recently that he would be going on strike. To earn extra money, he became an Uber and Lyft driver. The strike was averted; however, Ryan continued to drive for both ride-sharing companies. I asked him why he was still driving, and he said he thoroughly enjoyed it and that the money wasn’t bad.

Based on Ryan’s experience, I decided to become a driver for both Uber and Lyft, to really find out if I would be treated as an employee or not. I decided to drive at night and all day on weekends. In addition, I decided to donate the money that I made to our foundation, CWSEAPA® Foundation, which is a Christ-centered organization that helps people who cannot find help in other places.

How I Got Started First, I downloaded the Uber and Lyft apps, and then I signed up as a driver for both services.

Signing up for Uber was surprisingly easy. I simply gave the company my Social Security number, a photo of my driver’s license, and proof of insurance and registration. About 24 hours later, I was approved. I presume that Uber did a background check, but I don’t know for sure.

Signing up for Lyft was just as easy. The process was basically the same as Uber’s except after I signed up, I got a text message from a driver who I will call “Dave.” He introduced himself and made an appointment for me to meet him the next day. Dave instructed me to bring my driver’s license, insurance, registration, and the car that I was going to be driving.

I met with Dave the following day, and he was an extremely nice guy. He took photos of the documents, as well as some shots of me, my car, and my license plate. He then asked me to drive him up the road. During our drive, Dave explained that he was a lawyer in his home country and had to drive for Lyft here because he needed to make money to go to law school.

The reason Dave asked me to drive, I guess, was to prove that I could drive. I did as Dave instructed, and when I was done, he showed me how the Lyft app worked and gave me some tips on how to make more money. He then told me that Lyft would be in touch with me in a few days.

A few weeks later, I received an instruction manual from Lyft in the mail, which included a sticker to put on my car. However, I had been warned by Ryan not to put this sticker on because taxi drivers would key my car. The manual also included a few other things that were required of me as a Lyft driver.

I texted Ryan that I had become a Lyft and Uber driver, and he gave me a bunch of tips that he had picked up along the way. He told me about phone chargers, so I ordered one that could accommodate all phone types. He mentioned a Wi-Fi connector so my riders would have free Internet during their rides, and I ordered one, too. Then Ryan texted that he would be over right away to show me something (he only lives about three miles away).

Upon arrival, Ryan showed me how his 2016 Honda Civic was set up. On the back of his driver’s seat and front passenger’s seat was a sign that told the rider about the car chargers and gave the Wi-Fi password. Ryan was a huge help to me in getting started.

Time to Hit the Road The following Saturday I went ahead and opened the Uber app. I changed it to show that I was online and ready to work. Within a few moments, I got a ping and I accepted my first ride. On my way to pick up my first rider, I received a text from him giving me instructions on how to enter his gated community. I arrived at his home and waited. He exited his home with his wife while I got some music going, as instructed by the Uber driver’s app. I always listen to classical music because it relaxes me. I work a very stressful job and it is either that or I drink myself silly.

When my rider, who I’ll call “Nick,” entered the vehicle with his wife, I asked them what kind of music they wanted to hear. They asked me to set the stereo to scan. I smelled alcohol on his breath and later it occurred to me that a lot of people probably use Uber when they want to go out drinking. Even though I was not much of a drinker, I could still see where this could be beneficial.

The Uber app for drivers is extremely easy to use. I swiped to the right of the app to accept that Nick was in my car, and away we went.

My passengers were going to an event for Orlando City Soccer Club (OCSC), our local Major League Soccer team. If you are from Orlando, chances are you have a purple OCSC magnet on the back of your car. Nick saw mine, and as it turned out, he was an executive with OCSC. We talked about the team all the way to his event. When we arrived at the hotel, I swiped right on the app telling Uber that I was done with the ride, and they asked me to rate Nick as a rider. I gave him five stars, which is the highest rating, and away I went.

I decided on my way home that I loved working for Uber. I enjoy meeting people and I am getting paid to drive my Lexus around, which is a very smooth and calming ride. I also get to talk to people, and possibly meet a new client, all while funding our foundation. I decided that I would drive for both Uber and Lyft every chance that I could.

I was still waiting to get approved by Lyft when I again opened my Uber driver’s app. I clicked myself as online, and within a few minutes, I was pinged. I didn’t take the offer to drive because the address was in a bad part of town. I also wanted to see what Uber would do if I didn’t take a ride. When Uber pings you that there is a rider, you have about 10 seconds to accept the ride. If you don’t, the app looks for another driver.

About five minutes went by and there was a second ping, but this time it was a message from Uber stating that there was a “surge” and the payments would be 25 percent to 50 percent more. I learned from riders that these surges were usually held during a prime part of the day, or when there were more riders asking for rides than there were drivers. The surges, from a driver’s perspective, gave them the incentive to drive because they are paid more. Obviously, the riders are not as thrilled with the surges.

A second later I got another ping. This time I accepted it, as it was about two miles from my house. I proceeded to pick up my rider, who I’ll call “Tony.” After climbing into my car, he asked if I minded stopping at the store on the way. I asked him where he was going, and he said, “I didn’t put the address in.” That was when I learned that the rider usually types in their destination and Uber will even provide a GPS. It would have been helpful to have had a little training beforehand on how to use the app. I had never used the Uber app as a rider, so I had no idea how it worked. I told Uber to use Waze as our GPS and we got started on our way.

On my way back from dropping off Tony, I got a text that I was approved to drive for Lyft. I can only assume that the Lyft background check was more extensive because it took longer, but I don’t know that for sure.

My experience with Lyft was I accepted a total of five pings. Each time, I would get halfway to my rider’s location when they canceled the ride. The problem with Lyft is that when a rider cancels, the driver gets nothing. With Uber, if the rider cancels, the driver gets $5. Based on my bad initial experiences with Lyft, I quit opening the app.

My Issues with Uber One of the things that I don’t like about being an Uber driver is that when a rider requests a ride, they put in the address of where they are going. However, when the driver gets the ping, we only get the location of the rider, but not their ultimate destination.

There were two times in my journeys that I got caught in no-man’s land. What that means is that Uber took me from a town where you get a lot of pings to a place where it took me 45 minutes to get back to civilization and in “ping range.” The cost of the ride didn’t outweigh the loss of income that ensued from those long trips.

Another problem is that there’s no function for a rider to tip a driver with Uber. We just get 75 percent of the total fare. However, if we offer exceptional service, we don’t get anything extra other than a rating that a rider can give us. I was tipped several times in cash from riders. On trips to the airport, I would help the rider with their bags, and upon arrival at the airport, I would be tipped about $4 to $5. I felt strange about accepting these tips, but I got used it.

Only on one occasion did I experience a jerk. Usually, as a rider enters my vehicle, I begin to make small talk with them, at least until I find a place where we have some common ground and can begin a conversation. It makes the trip go by a lot faster. He was headed to the airport. I asked him where he was going and he told me up north. I told him that I heard it wasn’t as cold up there as usual, but he just gave me the silent treatment. So, I asked if he was married, and he said he was. I asked if he had any kids, and he shot back, “Why are you asking all these questions?” I told him I was just making small talk, and he said, “Please just shut up and drive.” I wanted to pull over the car and give him the boot. After telling Ryan about this, he told me that Uber would have done nothing if I did that, so now I’ll know for next time. Anyway, I turned up the music and stayed silent.

As I was driving this jerk, I got it in my head that he was treating me this way because he thought that I was lower than him, being an Uber driver. It didn’t matter that I was driving a Lexus, nor did it matter that I probably make double what he does. I was wearing shorts, my UCLA T-shirt, and my Chicago Cubs hat. If I was in a suit like I wear when I go to work, would he have treated me the same way? If a client treated me that way, I would fire them immediately.

We arrived at the airport, and instead of getting out to help this jerk with his bag, I simply stayed in the car and popped the trunk. He asked if I was going to get out and help, and I told him the trunk was popped. I gave this rider my first one-star rating.

What I Learned Going back to the point of this article, does Uber and Lyft treat their drivers as employees? In my experience, I would say Uber does not. I was free to work when I wanted to work. I could accept pings, or not accept pings. However, after not accepting three pings in a row, the Uber app will log you offline. At no time was I given a set schedule. I was offered more money to work at certain times, but I was never told that I had to work during those hours. I was never told that I had to accept a ride, and I never felt any relationship with Uber that would make me feel like I was an employee.

I told some riders what I was doing and they would mention that in other cities, drivers were paid an hourly rate. If they made more in fares from driving, they would receive the fares instead of the hourly rate. In that case, an argument could be raised that the drivers in those areas could be employees. They are being paid by the hour and an employee/employer relationship could be interpreted. I would guess that the hourly rate would be mandated by the municipality in which the driver was working. That’s not the case in Orlando, but it would have been nice, especially for those trips to no-man’s land and back.

I ended up making about $25 an hour. That wasn’t bad for driving people around and learning about them.

My experience with Lyft was more like that of an employee. For instance, there was an orientation. Secondly, they sent me a sticker to identify myself as a Lyft driver. Thirdly, I received a manual. All those actions could misconstrue the relationship of a contractor. One could say that an employee/employer relationship could exist between a Lyft driver and Lyft.

However, as I never technically drove for Lyft, I can’t positively conclude that the employee/employer relationship exists. I guess one day I could open the app and try it again, but to be honest, I am more comfortable with Uber.

I interviewed three other drivers to get more perspective for this article. I figured with four differing opinions, we would have a more well-rounded view of whether Uber and Lyft treated their drivers as employees.

My first interview was with my cousin, who I will call “Paul.” He’s been driving for Uber for three-and-a-half months. I asked him if he was familiar with the class-action lawsuit, and he stated that he wasn’t. I then wanted to find out if Uber exerted any control over him. Paul responded, “No, they send updates on what’s going on in the area, but that’s it. I choose when and where, and as I look at it, I’m an independent company working under their umbrella. I don’t consider myself an employee; if they wanted more or asked me to do something additional, they would have to pay me as an employee. But I get no such feeling. My problem is their fees and lack of people (riders) to cover their growing number of cars.”

This seemed to be a common concern of all the drivers I interviewed. I asked Paul if Uber ever told him that they would drop him from the system if he didn’t complete a certain number of rides. Paul stated, “No. On the contrary, they actually sent me an email asking me if I would train other drivers.”

This piqued my interest: Would there be control if Paul was a trainer? I asked him what his pay would be as a trainer, and he told me, “Two additional dollars per fare; of course, I declined. As far as being dropped from the system, the only things I know is that if people report you with low stars, that means there’s a problem with your driving. But it’s the same way for riders. I like the system – it keeps both riders and drivers in check by each other. And I agree that, as an independent or an employee, if you don’t do your job sufficiently, you get removed.”

I asked Paul if he ever drove for Lyft, and he said he hadn’t. I ended my interview by finding out what Paul liked most about driving for Uber. He said, “What I like the most is I can go out and do it whenever I want to, stop whenever I want to, and I can even head toward the grocery store and set my destination and I only get rides going toward that destination, so it does have its conveniences. Whenever I want to go online, whenever I want to go offline – it’s always my choice.”

I then interviewed another driver who I will call “Liz.” Liz has been driving for Uber since January 2016. I asked her if she also drove for Lyft, and she said she did. I asked her which one she liked better, and she stated that she liked Uber the best because she made more money with Uber.

I asked Liz if she was familiar with the class-action lawsuit, and she said she had heard about it but didn’t know the details. I briefly explained it to her. Then I asked if she ever felt that Uber exerted control over her. Liz told me, “When I got the job at Hilton, I was getting emails asking me to drive, but nothing threatening, so no control. When I left Hilton, I started right back on Uber without a problem and no delays or having to re-sign up. Well, I was previously listed as an Uber Select, and when I went back, I was only Uber X. So, I rarely got Select, as people would not pay Select rates for a Camry when they could get it under X.”

Uber X is what most drivers drive under. However, if you have completed 50 trips, have a 4.6 driver rating, and drive a “luxury car,” you can be on Uber Select, which charges the rider double. I asked Liz if Uber provided any training to her. She laughed and said no. I asked if she enjoyed driving for Uber, and her response was, “Ninety-nine percent of the time I like meeting different people and talking to them, but then there are those who are jerks or assholes. I do around 75 or more rides a week.” I asked if the money that she made was enough to sustain her lifestyle. She said that it wasn’t.

My last interview was with Ryan, my best friend. I knew what his answers would be before I asked my questions because he had already helped me tremendously during my time as a driver. Nevertheless, I wanted to quote him for this article.

My first question revolved around Lyft because I was interested in his experience with that service. I asked him how long he has worked for Lyft, and he said since July 2016. I asked if he had an orientation with Lyft, and he told me, “A ‘mentor’ came to my house and explained how Lyft worked, took my picture, checked out my car, and took a picture of that, too. He gave me a sheet of paper with some guidelines and ‘primetime’ hours.”

I asked Ryan if he had received a sticker and orientation booklet in the mail like I had. He had received them in the mail about two weeks after he started driving for Lyft. He called the sticker “trade dress” for the window on the front passenger side.

I turned my attention to control and asked if he had ever received a notification or email after not driving for Lyft for a period of time. “No,” he said. “I took three weeks off from driving for Lyft after Hurricane Matthew so I could work restoration, and I never got an email or any notice from Lyft asking why I was not driving for them.”

I asked if he ever felt that Lyft exerted control over him as a driver. His answer was a flat-out no.

Then we talked about Uber. I asked Ryan how long he has been driving for Uber, and he answered since September 2015. When I asked if he had received an orientation with Uber, he said that he had not. I then asked if Uber exerted any control over him as a driver. He said, “No, and it was the same with Lyft. I took three weeks off from driving and Uber never asked why I was not driving for them.”

I then asked if he was familiar with the class-action lawsuit. He said, “Somewhat, but I really haven’t been following it due to my limited driving for Uber. I’m lucky if I put in more than four hours a week.”

I still wanted to know what Ryan thought, even with his limited knowledge of the suit, but he just didn’t think of himself as an employee because he felt he was his own boss. “I drive when I want to drive, and I can refuse any passenger I deem unsuitable to sit in my car,” he said. “I haven’t refused anyone yet, but if I ever think I need to, I will without any thought.”

When asked about his preference between Uber and Lyft, Ryan said he liked Uber better. So, three completely different people, and no one felt as if they were employees. That also exactly matched my experience. Uber exerts no control over its drivers. There is no training, no orientation, and no times that I am required to drive.

I will add that my experience as an Uber driver is limited to the Orlando area. It may be different in other locations, but from my point of view, there is no employee/employer relationship.

At no time did Uber exert any control over me, nor did the company tell me when to drive or give me a schedule. I would like to say that this was an amazing experience. I thoroughly enjoyed being a driver. So much so that I am going to continue.

Next time you are in Orlando and you request an Uber, if your driver’s name is Craig S. and he is driving a brown Lexus, it could be your friendly neighborhood tax man.

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