Florida is about to enact revolutionary new legislation that will ensure most ride-sharing drivers are independent contractors and not employees. After passing the Florida state legislature last week, Governor Rick Scott indicated he intends to sign the bill into law. When it takes effect on July 1, 2017, Florida will offer unprecedented protections to sharing economy companies that do business in the state, with the intent eliminating costly worker misclassification battles and also providing a boost to the gig economy in Florida.
Requirements to Assure Independent Contractor Status for Drivers
The primary political motivation for the bill is to ensure the safety of those using ride-sharing services provided by “transportation network companies,” (or, TNCs) which the bill defines as “entities using a digital network to connect a rider to a driver to provide prearranged rides.” The legislation will require TNCs to carry a certain amount of insurance for injury or property damage for both drivers and riders.
While these new insurance requirements are an enhancement to public safety, the real highlight of this new law is the classification assurance section. From an employment law perspective, the law will ensure that drivers are independent contractors and not employees as long as four requirements are met by the TNC:
- The TNC cannot unilaterally prescribe specific hours during which drivers should be logged into the digital network;
- The TNC must permit drivers to work for other ride-sharing services;
- The TNC must allow drivers to engage in any other occupation or business they desire; and
- The TNC and driver must agree in writing that the driver is an independent contractor.
Application to Gig Economy Companies
These four requirements are pretty logical and simple, it shouldn’t be too difficult for most gig economy companies to refine their driver engagement practices to satisfy them. For the TNC, the value in satisfying these requirements is significant: they gain protections from worker misclassification challenges which threaten their business models.
As evidence of the economic value to gig economy companies, look no further than Uber and Lyft, the two dominant ride-sharing services in the US, who have both been fighting multiple multi-million dollar class action lawsuits from drivers who claim they were misclassified as independent contractors. These groups of drivers, led by aggressive plaintiffs attorneys, are seeking to be classified as employees of the companies, not contractors, hoping to collect payment for alleged wage and hour violations and other benefits.
Quid Pro Quo – New Requirements for the Ride-Sharing Companies
Besides the insurance requirement mentioned earlier, the new law also stipulates some other new requirements for ride-sharing companies:
- TNCs must enact a zero-tolerance policy when it comes to drug or alcohol use among their drivers, and if the receive a complaint alleging a violation of the policy, they must suspend the driver from using the digital platform until an investigation is conducted;
- TNCs must also adopt a nondiscrimination policy with respect to riders and potential riders (including following applicable laws regarding service animals), and are required to reevaluate any drivers who receive low quality ratings because of alleged violations of this policy;
- TNCs must conduct a national criminal background check and a driving history research report for each new driver before permitting use of the digital platform and every three years thereafter, and are restricted from using drivers with certain infractions prescribed by the law;
- TNCs must provide riders with electronic receipts within a reasonable period after the end of a ride; and
- The fare, or the fare calculation method, must be communicated to the rider via website or app before the beginning of the prearranged ride.
Considering the relatively light burden these requirements will add, combined with the major benefit of the classification provision, there won’t be much argument from the gig economy companies in question.
What Does This Mean for Gig Economy Companies?
There is no doubt this new law is great news for ride-sharing companies in Florida. They will gain clarity and assurance on how to avoid worker misclassification fights. The bigger question is: what does this mean for other categories of gig economy companies in Florida? And will it have a spill-over effect in other states across the US?
It is clearly too soon to answer either of these questions, but you can bet a number of gig economy companies and state legislators across the country are going to be watching Florida to see the impact this law has. In the meantime, you can rest assured that our legal and compliance team at TalentWave will be watching these developments as they unfold so that we can best advise our enterprise clients on best practices for independent contractor compliance and engagement.
“ Wikipedia“, Seal of Florida