How Are Rideshare Drivers Different from Taxi Drivers?
Taxi and limousine companies consider their drivers employees. These employees make an hourly wage, plus tips, and can often be eligible to receive benefits such as health insurance or inclusion in a retirement savings plan. Taxi drivers must also obtain a special license in New York State before being permitted to transport passengers. Because taxi drivers are on the road much more than the average driver, their risk of being involved in a collision or other accident is much higher. Therefore, they and their vehicles are insured under a commercial insurance policy from the moment they turn the ignition key to the moment they park the taxi at the company lot. This level of insurance is costly to taxi cab companies but provides a high level of coverage to the driver, passengers, pedestrians, and other vehicles. In addition, taxicab companies in New York have to meet specific vehicle safety requirements and perform maintenance and repair on the vehicles they lease to their drivers.
Uber and Lyft, on the other hand, categorize their drivers as independent contractors, not employees. What this means, in a nutshell, is that rideshare drivers can choose their own hours, decide whether to take a fare or not, and must pay their own taxes on their earnings to the state and federal government. From a legal standpoint, being an independent contractor also means that the company, be it Uber or Lyft, cannot ordinarily be held responsible for the actions of its drivers, unlike taxicab companies. Rideshare drivers use their own vehicles, for which they have to maintain state registration and complete state inspection requirements themselves. In addition, they alone are responsible for maintaining and repairing their vehicles. When it comes to insurance, things get a little more complicated, as discussed below.