For the past couple years, ride sharing services, such as Uber and Lyft, have had cabbies in big cities around the country scared about their future profitability. A recent decision in California now has such services worried about their own future profitability and the survival of their very business model. It made big news when the California Labor Commission ruled that Uber drivers are employees rather than independent contractors. It cannot be underestimated what a huge difference this would make to such services going forward. When someone is considered your employee, you suddenly become responsible for withholding their taxes and a myriad of other federal and state employment regulations.
So far, this is just a ruling in California and is not affecting them anywhere else says business executive Shaygan Kheradpir. It remains to be seen what ramifications this ruling will have for contract work in general in California. It is also not known whether this decision will be treated as precedent in other states or if they will uphold Uber’s belief that their drivers are independent contractors. Companies such as Uber having very low expenses due to them simply serving as a middle man between drivers and those who want a ride is one thing that has attracted a lot of venture capital to these types of startups. It remains to be seen if this decision dampens that at all or if backers will keep the money flowing while seeing if the thinking behind this decision spreads across the country.