The Gig Economy And Employer LiabilityMarch 11, 2019
Economists have been talking about a shift in the way Americans work for several years. Economists Lawrence F. Katz and Alan B. Kreuger predicted in 2015 a sharp rise in the way Americans work sharp rise in the way Americans work, from traditional jobs to more short-term contract work.
While the shift has not been as dramatic as originally predicted, about ten percent of American workers make their living this way, and many more make extra income outside of their full-time or part-time jobs by working for companies like Uber, Lyft, TaskRabbit, and others.
Employers like using independent contractors – they do not have to provide health insurance or worker’s compensation benefits, and they can avoid liability for the workers’ actions, at least in theory. Under the doctrine of respondeat superior , an employer is liable for the actions of his employees if the employee’s actions were in the scope of his employment. When employers consistently use independent contractors for most of their tasks, or the contractor works exclusively for one employer, the line between contractor and employee can become blurred.
There are several ways in which an employer may be found liable for the actions of independent contractors:
- If the contractor is performing an “inherently dangerous activity.” If the job for which the contractor is hired involves an activity which is likely to cause harm unless special safety precautions are taken, the employer may be held responsible for the contractor’s negligence. Some examples of activities that have been found to be inherently dangerous are bounty hunting, flying a small plane, and cutting down trees.
- The employer was negligent in hiring the contractor. Many lawsuits against Uber have been filed by customers who were assaulted by Uber drivers. The plaintiffs claimed that Uber failed to perform adequate background checks on its drivers. It remains to be seen whether the Uber suit will be successful, but many courts have considered the question of negligent hiring with varied results.
- The employer’s actions contributed to the loss. If you have ever wondered why Domino’s no longer offers its “30 minutes or free” guarantee, the case of Kinder v. Hively Corp is the reason. A St. Louis jury awarded a verdict of $78 million to a woman who was severely injured by a Domino’s driver who ran a red light and broadsided her vehicle. The driver was trying to make a delivery within the 30-minute time period in order to avoid having to give the customer a free pizza. The jury awarded both compensatory and punitive damages against Domino’s, reasoning that the 30 minute or free policy encouraged reckless driving by its contracted drivers.
- The contractor is determined to be an employee. Even if a worker is hired on an “as needed” basis and is given a 1099 at the end of the tax year instead of a W-2, he may still be deemed to be an employee. The most important factor in making this determination is the amount of control exercised by the employer over the contractor’s actions. The Texas Supreme Court held an employer liable for injuries to a contractor’s employee when it found that the employer exercised substantial control over how the contractor’s work was to be performed (Redinger v. Living, Inc.).
The Ninth Circuit Court of Appeals declared all Fedex delivery drivers in the State of California to be employees rather than independent contractors (Alexander v. Fedex), a decision that could have far-reaching consequences to workers and third parties alike. The court reasoned that FedEx closely controlled the drivers’ routes, requires drivers to report each delivery, and monitors drivers’ workloads. However, a US District Court in Pennsylvania came to the opposite conclusion in a case involving Uber drivers.
As more and more workers opt to derive all or part of their income from independent contractor work, the employer liability issue will continue to evolve. If you have a client who needs help with their expenses while their personal injury claim is pending, we can help.
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