Contractor or Employee? The New Rules of Working for Uber, Instacart or TaskRabbit

Sharing economy
Instacart on Instagram

Whether you’re driving around town, delivering groceries or scrubbing floors, you have plenty of options to pick up work through the sharing economy.

This new world of work offers flexible gigs that can supplement other jobs — or sometimes even serve as your main income stream.

In most cases, you’re not an employee of the company you work for. If you’re driving your car for Uber, for instance, you work as an independent contractor instead of a regular employee who receives benefits and has taxes taken from his pay.

However, recent updates to the rules might change the way you can make money working for service providers like Instacart, Uber and more. Let’s take a look at what’s in the news and how you can continue to make money through flexible gigs.

Instacart’s Voluntary Reclassification

Grocery shopping and delivery service Instacart is transitioning 200 Boston-area shoppers and about 100 Chicago shoppers from contractors to part-time employees.

“When you look at the difficulty of shopping, picking and delivering items such as fruit or eggs that need to be carefully selected, you realize that grocery shopping can be complicated,” explained founder and CEO Apoorva Mehta in a June 22 statement. “For this reason, we want to provide supervision and training, which can only be done with employees.”

While personal shoppers for Instacart used to serve as both shoppers and delivery drivers, those tasks will now be performed separately. Personal shoppers in the two cities who wish to remain contractors can switch to a delivery-only role, as shoppers will be transitioned to part-time status. About 25% of Instacart’s Boston shoppers chose to keep their contractor status, a spokesperson told Slate.

The “new” employees will receive regular paychecks complete with minimum wage and the typical tax withholdings for social security, unemployment and Medicare.

Changes for California Uber Drivers?

Earlier in June, the California Labor Commission ruled that a driver was an Uber employee, not a contractor. The case applied to a single driver, and Uber was found to be involved in enough of the driver’s activities to be considered her employer.

“This is one of the first times that the people that make these decisions … sat down and evaluated a wide range of factors that they used to determine whether a worker is an employee or a contractor,” Inc senior editor Kris Frieswick said on the Inc. Uncensored podcast. “[Factors such as] how much control does the company have over the work hours of the person? Do they have control over the method by which the job is conducted?”

The IRS classifies a worker as an employee if the company paying him has controls how and when he does the job. Indicators that a worker should be reclassified as an employee include mandating a certain work schedule, requiring a uniform and enforcing methods of completing tasks.

“As a contractor, you say to me, ‘Kris, I need you to write a story about X, it’s due on X.’ You don’t tell me where to write it, you don’t tell me how many hours per day I have to spend writing it, you just say, ‘It’s due on this day, party on,’” Frieswick explained how freelance or contract work differs from traditional employment.

She went on to note that in this particular Uber case, the fact that inactive Uber driver apps are disabled after 180 days implied a required work schedule, and led the Commission to rule the driver was an employee. Uber has appealed the decision.

Similar cases against Uber have cropped up in other states; those decisions have confirmed the driver classification as an independent contractor.

How to Make Sure the Sharing Economy Takes Care of You

Sharing economy gigs provide some informal benefits for the people who provide services through them. The gigs are usually flexible, making them ideal for students and others who juggle a host of obligations. Some tasks can be performed around the clock, catering to both early birds and night owls. And for the most part, these flexible jobs aren’t too mentally taxing. While driving customers, walking dogs, cleaning houses and grabbing groceries aren’t tasks without stress, we can probably agree that the work is less stressful than, say, performing surgery.

So, how can you make the most of these gigs when you’re not sure if they’re going to change in the near future? Here’s how to make sure you’re looking out for your best interests as a worker while still looking out for your wallet:

Read Everything

When you sign up for a gig, don’t just skim over the terms, conditions and agreements you’re given. Note any caps on earnings or regulations you have to follow. If you’re unsure of something, ask. Companies that rely on independent workers to provide services to customers should be more than happy to clear up any questions you have as you join.

Think About Insurance

The amount of insurance provided by gigs varies widely, so you want to know what’s covered and what’s not.

As an independent contractor, you won’t be eligible for health insurance, so plan accordingly to get your own coverage. If you’re driving your car, you may want additional insurance coverage above what the company you’re driving for requires.

If there’s a chance you could get hurt at work — by falling off a ladder or suffering a bicycle crash — you may also want to consider buying disability insurance. If you’re relying on those bike deliveries to pay your bills, having a backup plan that includes insurance can make a physical setback a little less stressful.

Be Wise — and Skeptical — About Pricing

“Many gigs seem to offer decent pay,” Natasha Singer wrote last year for the New York Times. “But they may not look that great after factoring time spent, expenses, insurance costs and taxes on self-employment earnings.”

If you’re working for a company that sets your rates, make sure you’re comfortable with what’s left after the company takes its cut and the government takes theirs through your estimated quarterly taxes.

If you can, opt for a company that allows you to set your own rates. DogVacay, for instance, allows sitters to set their own rates depending on the complexity of the task to account for a pet’s length of stay or medical needs — or simply to lend credibility to a very experienced sitter.

Last year, TaskRabbit changed its business model so that service providers wouldn’t have to bid on tasks; now “Taskers” make at least $15 per hour.

Have a Back-Up Plan

If the company you work with changes its policies — or even shuts down suddenly — how will you react? Do you have a plan for picking up other work to supplement your income? Always be on the lookout for additional and alternate income options.

Your Turn: Has your work through the sharing economy changed? How are you maximizing these work opportunities?

Lisa Rowan is a writer, editor, and podcaster living in Washington, D.C. She knows all about doing taxes as a freelance worker.