In Lyft's S-1 this morning, the company exposed the potential consequences of converting its independent contractor drivers into W-2 employees. This, of course, has been an ongoing conversation within the show economy.
Those who work as 1099 subcontractors can set their own schedules and decide when, where and how much they want to work. For employers, employing 1099 entrepreneurs means they can avoid paying taxes, overtime, benefits and allowances.
As Lyft notes in S-1, this conversation has resulted in a number of lawsuits, arbitration proceedings, government investigations and more.
"The criteria for determining whether a driver is an independent contractor or an employee vary according to the laws in force and are generally very sensitive to the facts," says Lyft in his S-1. "The laws and regulations governing the status and misclassification of independent contractors are subject to divergent changes and interpretations by various authorities, which can create uncertainty and unpredictability. We continue to argue that the drivers of our platform are independent contractors in such legal and administrative proceedings, but our arguments may not succeed. "
If Lyft is forced to reclassify its pilots, this could result in new financial charges for the company. Including:
- Reimbursement of expenses
- A potential injunction preventing Lyft from continuing its current business practices
- Claims for social benefits, social security, compensation and unemployment
- Monetary exposure related to the lack of withholding and payment of taxes, unpaid wages and the requirements of the law on wages and hours of work
Lyft goes on to point out that reclassifying its drivers into W-2 workers "could require us to significantly change our existing business models and operations." This is one of those risks that could very easily occur.
As Lyft points out, he is actively involved in six class actions concerning the classification of drivers. And the company has already settled two lawsuits for $ 27 million in 2013 and $ 1.95 million in 2018. Meanwhile, California is actively considering this issue in Bill 5, entitled Assembly. assembly. which would improve the protections and rights of workers in the market economy. TThis bill was introduced in the light of a revolutionary decision of the Supreme Court in April.