Ask HN: Can “on-demand” marketplace workers be independent contractors legally?

[todd3834]

I've been researching the on-demand marketplaces like Uber, Lyft, DoorDash etc… All of them claim that the people preforming the service are independent contractors. As you guys may be familiar, there is a class action lawsuit against Uber and Lyft from service providers that say they were not independent contractors but they were employees. Talking to a relative who used to work at the IRS and specialized in these types of disputes has pointed out some of the key things that many business get wrong.

1. "Who is paying the service provider". If you collect the payment from the customer and the service provider gets paid by you then you could be in trouble. As far as I can tell, almost all of popular merchant accounts people are using seem to charge the customer, take their transaction fee, then "transfer" the money to the service provider. In that scenario, who paid the service provider? It feels like the business did, not the customer. The only one that I see which might work is the Paypal Adaptive Payment system as they let you direct the payment directly to the service provider and then the service provider pays the transaction fee.

2. "Are you telling them how to do the work". I know that Uber and Lyft both have rules that the drivers need (are recommended) to follow. Telling the Uber black car service to provide a water bottle etc… could be a problem. I don't think DoorDash does this but what if they wanted to their drivers to wear a DoorDash t-shirt, would that be a problem?

There are other factors that are considered but it seems like these two are the biggest.

More info on the laws: http://www.taxes.ca.gov/iCorE.bus.shtml

It is my opinion that the current laws need to adapt so that this entire new genre of business can operate legally. I'm curious what fellow entrepreneurs on this site have learned on this subject.

[wolfico]

A lot of people misuse 1099 status but I don't think Uber, et al are among them. The drivers use their own cars, choose their own hours, can work or not work as they see fit, and are not 'directed' by Uber for the most part. Most of my friends who drive Uber, anecdotally, consider themselves 'self-employed' in more than just tax status.