California Taxidriver Definition Laws

7/31/2019 California Taxidriver Definition Laws

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TAXICAB INDUSTRY

DE 231TC Rev. 3 (7-03) Page 1 of 3 CU

Taxicab drivers typically operate taxicabs under one ofthree business arrangements:

1. The taxicab company acknowledges the driver as anemployee.

2. The driver owns and operates the taxicab,independently arranges fares, and personally pays forrequired licenses, permits, and insurance.

3. The driver performs services as a lease driver oneither a fixed-fee or percentage-of-receipts basis.

Under the first arrangement, the taxicab driver is subjectto the direction and control of the taxicab company andwould be considered a common law employee (refer to

Information Sheet: Employment, DE 231). Under thesecond arrangement, the taxicab driver independentlymakes business decisions related to the taxicab service.Since the driver is not subject to the direction and controlof the taxicab company, the driver would be consideredself-employed. Under the third arrangement, determiningwhether a driver is an employee or self-employed personrequires a detailed analysis of the business arrangement.How the industry-specific details of the arrangementimpact the employment status of drivers who lease ataxicab on a fixed-fee or percentage-of-receipts basis isdiscussed below.

FIXED-FEE DRIVERS AS EMPLOYEES IN THE TAXI-CAB INDUSTRY

There is a strong indication that taxicab drivers who leasetaxicabs on a fixed-fee basis under all of the followingcircumstances are employees. Therefore, there is a highprobability that drivers classified as independent contrac-tors are incorrectly classified when the drivers:

Lease the taxicab on a daily basis or pay the leasefee at the end of every shift.

Do not have a financial interest in a business and arenot subject to a financial risk of loss.

Are not involved in a separate and distinct businessof their own.

Perform work that is a regular part of the taxicabcompanys business.

Can be terminated by the taxicab company without

liability by termination or nonrenewal of the leaseagreement.

FIXED-FEE DRIVERS AS INDEPENDENTCONTRACTORS IN THE TAXICAB INDUSTRY

There is a strong indication that taxicab drivers who leasetheir taxicab on a fixed-fee basis are independent contrac-tors when they:

Do not perform services under the direction andcontrol of the taxicab company. They are free toconduct their business however they choose.

Do not rely on the company for their customers. Theysecure their customers on their own with only anoccasional referral from the company. They are notrequired to accept any referral.

Prepay to lease a taxicab for a period of at least 28days.

Choose their shifts to drive the taxicab. Must be provided advance notice of termination or

nonrenewal of the lease agreement by the taxicabcompany or the company may be liable for damagesunder the terms of the agreement. Drivers are liablefor unpaid lease fees when they withdraw from theagreement early, and lease agreements provideprovisions for arbitration of disputes.

DRIVERS WHO LEASE TAXICABS BASED ON APERCENTAGE OF THEIR RECEIPTS

The California Unemployment Insurance Appeals Board(CUIAB) has held taxicab drivers to be employees whenthe following circumstances apply:

The drivers pay a percentage of what they earn to thetaxicab company in order to lease a taxicab.

Since the taxicab companys income depends on howmuch revenue is generated by the driver, the com-pany may attempt to increase that income by placingcontrols and requirements on the drivers, such asassigning shifts, requiring the maintenance of trip

sheets, and paying for all advertising. The drivers do not have a substantial investment inthe business, are not subject to an entrepreneurialrisk of loss, and do not have a distinct business oftheir own.

The work performed by the drivers is a regular part ofthe taxicab companys business, and drivers canterminate or be terminated without any liability.

IMPACT OF GOVERNMENTAL REQUIREMENTS

Local governments commonly mandate that a taxicabcompany exercise certain controls over taxicab driversand the companys operation of vehicles. Depending onthe jurisdiction, such controls may include, but are notlimited to, driver dress codes, maintenance of triprecords, restrictions on and requirements for the driversuse of the vehicle, response time goals and handling ofdispatches, required color schemes, driver and companylicensing, driver training, and a variety of requirements toensure transportation accessibility and public safety.Such mandates are not viewed as being evidence ofcontrol and are given no weight in making the ultimatedetermination.

However, if the company expands upon or exceeds thegovernment mandates, then the requirements are consid-ered in determining the amount of control exercised overthe drivers.


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KEY ELEMENTS IN THESANTA CRUZ TRANSPORTATION CASE

The terms of the lease allowed the company toterminate the drivers.

The drivers could be terminated under the leaseagreement if they did not maintain good relations withthe public.

The lease agreement designated the time period whenthe shift began and ended.

The drivers were required to schedule their meal breakswith the dispatcher.

The drivers were prohibited from using the taxicab forpersonal use.

The drivers were required to accept charge slips fromcertain customers.

The drivers were required to conform to a companydress code.

The drivers were required by the company to account forfares they received by a daily trip sheet and there was noevidence that the city required the drivers to maintain tripsheets.

WEIGHT GIVEN TO ELEMENTS IN THESANTA CRUZ TRANSPORTATION CASE

The right to terminate at will is strong evidence of em-ployment. The right to terminate conveys an inherentpower of the company over the driver. The companycould choose not to renew the lease of a driver withoutadvance notice or liability. This would be strong evi-dence of an employment relationship and would begiven high weight.

The company exercised control over the actions andbehavior of the drivers by requiring them to always havea good relationship with the public. Failure to do sowould result in the termination of the driver. With thisright, the company can demand many things of thedriver, and the driver, fearing loss of his or her job, would

be obliged to follow such demands. High weight wouldbe given to this element.

When the drivers are not allowed to set their own hoursof work, the company is directing and controlling theirservices. This element is given medium to highweight.

When shift drivers lease a taxicab for 12 hours a day or12-hour shifts over a period of a week and leases areallowed only when they are available for the shiftrequested, drivers cannot set their own hours and arenot free to work when they choose.

If the dispatcher has control over when breaks aretaken, this is strong evidence of control over the driversand would be given high weight as an employmentelement. If the drivers are only required to give noticeof breaks to the dispatcher, the element would be givenlow weight.

The company controlled the use of the taxicabs by thedrivers. This element would be given medium weight.

The company exercised control over the services byrequiring the acceptance of alternative methods ofpayment. This was evidence that the company had theright to control the services, and that right wascomplete and authoritative. This alone is strongevidence of an employer-employee relationship and isgiven high weight.

A specific dress code, such as the wearing of uniforms,is given high weight and is strong evidence of employ-ment. A general dress code, (for example, neat appear-ance) would be given low weight.

Required reports are viewed as review of work which isstrong evidence of the taxicab companys right to control thedrivers. This element is weighted high as an indicator ofemployment. Having drivers complete city or governmentalagency required reports is an element given no weight.

MAJOR COURT CASE

In Santa Cruz Transportation, Inc. v. Unemployment Insurance Appeals Board (1991) 235 CA 3d 1363; 1 Cal Rptr 2d 641],the Appeals Court held that the drivers who paid the taxicab company a fixed-fee to lease a taxicab were employees of thecompany. Therefore, any fixed-fee lease driver who operates in a manner similar to the drivers described in the Santa CruzTransportation decision would be an employee. Refer to the chart below that lists the elements cited in the court decisionand the weight the CUIAB and the courts will give to each.

Table continued on next page.



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KEY ELEMENTS IN THESANTA CRUZ TRANSPORTATION CASE (CONT.)

The work did not require the expertise of a skilledprofessional.

The drivers did not advertise their services.

The taxicab company operated a fleet of cabs for publiccarriage.

The taxicab companys name was on the taxicab.

The drivers work was part of the regular business of thetaxicab company.

The taxicab company owned the taxicab.

The taxicab company owned the municipal taxicab license.

The drivers depended on the companys dispatcher for theirlivelihood.

The customers called the taxicab company for taxicabservices; the taxicab company arranged for the performanceof the services.

WEIGHT GIVEN TO ELEMENTS IN THESANTA CRUZ TRANSPORTATION CASE (CONT.)

Operating a taxicab does not require a high level of technicalskill and this element would be given high weight. A lowerlevel of technical skill is strong evidence of employment.

If the company holds itself out as a taxicab service and doesall advertising, this would be strong evidence that the driversare working in the furtherance of the companys businessand would be given medium to high weight.

The taxicab company was in the business of providingtaxicab services, not leasing taxicabs. This element wouldbe given high weight.

The companys name on the taxicab was an indication thatthe driver represented the taxicab company and the driverperformed services in the furtherance of the companysbusiness. This element would be given medium to lowweight.

The drivers services were performed as an integral part ofand in direct furtherance of the companys business, whichindicates employment. This element would be given highweight.

The drivers did not have a significant investment in providingtheir services (for example, own their cab, own medallions orthe permits necessary to operate a taxicab, etc.). This wasstrong evidence of employment and is given high weight. Adaily lease is not considered a significant investment anddoes not create an entrepreneurial risk of loss associatedwith an independent contractor.

The drivers operated under the companys license. This is anelement receiving high weight as evidence of employment.

If the drivers are required to use the companys dispatcher inorder to secure business, this is strong evidence that thecompany is controlling the services performed by the drivers.This element would be given high weight.

If the customers generally secure the services of the driversthrough the company, this would be an employment elementas the drivers depend on the taxicab company for business.If the drivers secure business on their own and could acceptor reject referrals from the company dispatcher, this would bean indication of independent contractor status. This elementwould receive high weight.

ADDITIONAL INFORMATION

This information sheet describes the most common circumstances in the taxicab industry and how those circumstancesaffect whether a taxicab drivers services are performed as an employee or independent contractor. Questions regardingemployment status determinations in the taxicab industry should be directed to:

Field Audit and Compliance DivisionCentral Operations, MIC 94

P.O. Box 826880Sacramento, CA 94280-0001

(916) 464-0331

Speech and hearing impaired persons can reach us at 1-800-547-9565.

Equal Opportunity Employer/Program. Auxiliary services and assistance available to persons with disabilities.


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California Taxidriver Definition Laws