The Legal Risks of Being a Rideshare Driver

At first glance, driving for a rideshare company comes with plenty of perks, like working when you want, for as long as you want, with no boss looking over your shoulder. The reality is less rosy. Rideshare drivers miss out on many benefits they would receive if they were employees. They expose themselves to personal liability for any accidents and don’t receive employment benefits.

Before signing up as a rideshare driver, make sure you understand the legal challenges. Talk to an employment lawyer for legal advice about rideshare driving.

Rideshare Driving Classification

“It’s a hot topic,” says Derek Sells, chairman at The Cochran Firm. While early attempts to cap rideshare vehicles stalled in 2015, New York City passed legislation in 2018 to establish minimum pay rates and put a pause on new vehicle licenses to help address congestion and driver wages.

Brett R. Gallaway, an employment and labor attorney at McLaughlin & Stern, says the ridesharing companies classify drivers as independent contractors in an effort to avoid the Fair Labor Standards Act (FLSA).

Under the act, all employees must get time-and-a-half for hours worked in excess of 40 per week. The FLSA also requires payment of at least the federal minimum wage, which is $7.25 per hour and higher in most states. Section 13(b)(1) of the FLSA, also known as “the motor carrier exemption,” applies to employees who operate rideshare vehicles to pick up and drop off individuals. Says Gallaway: “Taxi cab employees are not to be paid overtime—they are exempt.”

“Of course, Uber wants to classify them as independent contractors, because anybody that is classified as an independent contractor doesn’t fall under any of the prerequisites of the FLSA or overtime regulations in state labor laws,” he adds.

Independent-contractor status is why Bryan Arbeit, an employment litigator at Morgan & Morgan, urges drivers to thoroughly read the terms of their agreement. Arbeit stresses that drivers need to understand just how much they can earn. “Companies usually quote gross earnings that do not include out-of-pocket expenses for such things as insurance, gas, a rideshare insurance policy, and other car maintenance,” he says. 

“A driver should consult an Uber accident lawyer if the driver experience is different than promised, or if they feel that they are not properly compensated.”

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Rideshare Drivers Are Independent Contractors

In most states, drivers are not employees of the rideshare service. Instead, drivers are independent contractors, a role with its own responsibilities.

Those considering driving for Uber, Lyft, or other ridesharing services need to be cautious before getting behind the wheel. For one, says Sells, they need to treat the job like it’s their own private business with auto insurance. Currently, most rideshare drivers are independent contractors. This means that, come tax season, they’ll receive a 1099 form in the mail.

“Approach it as if you’re the owner of a business,” recommends Donna Ballman, an employment & labor attorney. “Be aware of things like insurance coverage and other issues you may need to examine in a business model that you’re used to having an employer take care of.”

Gary A. Costales, an employment & labor attorney at the Law Offices of Gary A. Costales in Miami, agrees. “You have to have good habits for keeping records,” he says, “because those will carry forward into the future for Uber drivers and Lyft drivers.”

Legal Responsibilities of Being an Independent Contractor

One way to make record-keeping easier? Obtain a credit card, says Costales, and use it solely for your rideshare-related expenses. That way, come tax season, you’ll have less digging to do. “You also have to set aside something for the payment of payroll taxes,” he adds. “Even though you’re an independent contractor, you still have to pay payroll taxes like anybody else. Set that money aside as you go, so you’re not hit with a big tax bill at the end of the year.”

If you’re a new driver and your tax situation seems daunting, Ballman suggests hiring an accountant. “There are probably a lot of things that are deductible that you might not think about, so I do recommend getting some tax advice,” she says.

Perhaps the most important aspect of being an independent contractor is recognizing what state laws apply to you. “Independent contractors need to be more aware of what rights they do and don’t have,” says Ballman. “So things like Title VII, the Florida Civil Rights Act, the Fair Labor Standards Act—those things don’t apply to them. Sometimes contractors think they have rights that they don’t.”

Getting the Right Insurance

Insurance companies can deny an accident claim if you do not notify them that you are working as a rideshare driver. You may need to increase your liability coverage if you are in an Uber or Lyft accident. Your rideshare driver’s status could increase your insurance premiums, or the company could deny coverage. Make sure you have the right insurance requirements if you are ridesharing at the time of the accident.

Without insurance coverage, an injured rideshare passenger or other driver could hold you personally liable for accident-related legal claims, including property damage, lost wages, and pain and suffering.

Contract Law and Independent Contractors

While discrimination, workers’ compensation, and unemployment laws don’t apply to rideshare drivers, contract law absolutely does.

“Their situation is governed by whatever contract they signed with their rideshare company,” says Ballman, who recommends having an employment attorney review your driver contract if anything is unclear. “The rideshare contract may give you some rights, as far as under what basis they can terminate your contract and what rights you have if they do. You need to have a copy of that contract and understand what your rights are—especially if they do decide to try and terminate you.”

Find Experienced Legal Help

If you have questions about your rights as a rideshare driver, visit the Super Lawyers directory to find an experienced attorney in your area.