What You Need To Know About The $100 Million Uber Settlement


In August 2016, a court ordered Uber to pay its drivers $100 million in a settlement related to a class-action lawsuit. The reason: the company’s California and Massachusetts-based drivers were hired as 1099 contractors, but treated as though they were W-2 employees.

Uber agreed to the settlement, but recently a judge decided that it wasn’t enough. He suggested Uber should hire its drivers as W-2 employees instead.

Luckily for Uber, an appeals court ruled that the drivers should file separate cases, rather than a single class-action lawsuit. This ruling creates a precedent for Uber that can help disband other cases against them, but how long will this issue last? How many more misclassified workers will file suit? How much more will they spend on employment classification lawsuits?

Uber’s business model is similar to that of most event staffing companies. The majority of these agencies hire event staff as 1099 independent contractors.

The IRS is actively cracking down on all types of small businesses who misclassify their employees, and event companies are no exception. While they aren’t has high-profile as Uber, the liability and litigation risks remain the same.

The Benefits of the Status Quo

It is common practice for most event staffing companies to hire event staff as independent contractors. For each event you hire staff on-demand. They can work a single event or a multi-day (or even year-long) program. Agencies can provide new staff to clients, or stick to ones who they have worked with before. Event staff are friendly and eager to learn your talking points and embody your brand to build a meaningful connection with your customers.

Hiring staff as independent contractors means you are not responsible for taxes, worker’s compensation or benefits. As independent contractors, your staff are on their own and provide an immense amount of flexibility for your company.

Things to ask when nterviewing a brand ambassador

Are Your Staff Misclassified?

You might feel that it is fine to classify event staff as independent contractors rather employees. However, there is a big difference between the two in the eyes of the Department of Labor, and this difference that could cost you thousands of dollars in back taxes, fines, and more.

One big difference is the presence of an employer-employee relationship. Another key consideration is whether you are controlling staff behavior and earnings. By analyzing these points, you can determine which employment bucket your team really belongs in.

Ask yourself this: Is my event worker paid hourly for the job he/she is trained to do? If the answer is yes, that person is more likely an employee, not a contractor.

The IRS “common-law employee” test is another resource that can help determine your workers’ proper classification. This test says that “anyone who performs services for you is your employee if you can control what will be done and how it will be done.”

[Tweet “Is my event worker paid hourly? That person is more likely an employee, not a contractor.”]

1099 Contractors vs. W-2 Employees

To understand more about proper hiring practices, first you need to understand these two basic classifications: 1099 independent contractors versus W-2 employees. Below is a list of qualities for each classification as you determine how to hire your event staff:

Hire your event worker as a 1099 contractor if he/she:

  • Owns his or her own company
  • Works without direction
  • Works in his/her own time or according to an agreed upon deadline
  • Wears his/her own clothing
  • Uses his/her own tools/materials
  • Issues his/her own invoice

Hire your event worker as a W-2 employee if he/she:

  • Works during a required timeframe or shift
  • Wears what you require him/her to wear
  • Follows your brand standard
  • Imparts your talking points to the public
  • Takes directions from you
  • Uses the tools/materials you provide
  • Is paid hourly

This simple list can help you to determine how to legally classify your workers. Ignoring the rules for proper classification may expose your company to liability surrounding employee misclassification.

Most event workers are told what to wear, say and do. As a result, they fall into the W-2 category. However, many times they are mistakenly (or purposefully) classified as 1099.

To prevent liability, there is one fail-safe solution for your company: make the shift to W-2.

[Tweet “To prevent liability, there is one fail-safe solution: make the shift to W-2.”]

Why You Need To Classify Your People As W-2 Employees

Making the transition from 1099 contractors to W-2 employees can be daunting. While it may cost your company more to hire and employ staff, you will benefit tremendously in other ways.

  • Properly classifying employees means staying compliant and preventing future liabilities and significant financial penalties.
  • Your company maintains better relationships with your employees.
  • You keep the best workers on your team.
  • You protect your clients from the risk of co-employment liability.

Hiring your event staff based on their correct work classification doesn’t only prevent you from going through legal headaches in the future. It makes your company a trustworthy role model that other companies and employees can look up to. The bonus: clients who understand the importance of employment compliance will find peace of mind in partnering with you. The result? More business coming your way!

Do you have questions about the right way to hire event staff? Are you thinking of moving to a W-2 model? Whether you are looking to hire your own staff or want to invest in a W-2 compliant staffing partner, EPS is here to help! We have classified all of our event staff as W-2 employees since 2008 and are well-versed on state-by-state employment compliance, insurance requirements and more. Contact us for a free event staffing assessment!

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