Fillable Printable Information Sheet: Taxicab Industry (De 231Tc)
Fillable Printable Information Sheet: Taxicab Industry (De 231Tc)
Information Sheet: Taxicab Industry (De 231Tc)
TAXICAB INDUSTRY
The purpose of this information sheet is to provide
guidance to the taxicab industry on properly classifying
workers for employment tax purposes.
Taxicab drivers typically operate taxicabs under one of the
following three business arrangements:
1. The taxicab company acknowledges the driver as an
employee.
2. The driver owns and operates the taxicab,
independently arranges fares, and personally pays for
required licenses, permits, and insurance.
3. The driver performs services as a lease driver on either
a fixed-fee or percentage-of-receipts basis.
IMPACT OF GOVERNMENTAL REQUIREMENTS
Local governments commonly mandate requirements
that a taxicab company must meet in order to lawfully
own and operate a taxicab company. Generally, these
mandates will include provisions that require a taxicab
company to exercise certain direction and control over
its taxicab drivers to ensure transportation accessibility
and to maintain public safety. These requirements differ
in each jurisdiction and are not viewed as evidence of
an employment relationship unless a taxicab company
expands upon or exceeds the mandates. If a taxicab
company expands upon or exceeds the mandates, it will
be considered evidence of direction and control over the
drivers and is evidence of an employment relationship.
WHO IS A COMMON LAW EMPLOYEE?
Under Section 621(b) of the California Unemployment
Insurance Code (CUIC), an employee is “any individual
who, under the usual common law rules applicable in
determining the employer-employee relationship, has the
status of an employee.”
A common law employee is an individual who is hired by
a principal to perform services and the principal has the
right to exercise control over the manner and means by
which the individual performs his or her services.
The right to control, whether or not exercised, is the most
important factor in determining the relationship. The right
to discharge a worker at will and without cause is strong
evidence of the right to control.
Other factors to take into consideration are:
1. Whether or not the one performing the services is
engaged in a separately established occupation or
business.
2. The kind of occupation, with reference to whether,
in the locality, the work is usually done under the
direction of a principal without supervision.
3. The skill required in performing the services and
accomplishing the desired result.
4. Whether the principal or the person providing the
services supplies the instrumentalities, tools, and the
place of work for the person doing the work.
5. The length of time for which the services are
performed to determine whether the performance is
an isolated event or continuous in nature.
6. The method of payment, whether by the time, a piece
rate, or by the job.
7. Whether or not the work is part of the regular business
of the principal, or whether the work is not within the
regular business of the principal.
8. Whether or not the parties believe they are creating
the relationship of employer and employee.
9. The extent of actual control exercised by the principal
over the manner and means of performing the
services.
10. Whether the principal is or is not engaged in a
business enterprise, or whether the services being
performed are for the benefit or convenience of the
principal as an individual.
DE 231TC Rev. 6 (9-17) (INTERNET) Page 1 of 3 CU
Another consideration relative to employment is whether
or not the worker can make business decisions that would
enable him or her to earn a profit or incur a financial loss.
Investment of the worker’s time is not sufficient to show a
risk of loss.
The numbered factors above are evidence of the right to
control. These factors are described more fully in
Section 4304-1 of Title 22, California Code of Regulations.
When those factors are considered, a determination of
whether an individual is an employee will depend upon
a grouping of factors that are significant in relationship to
the service being performed, rather than depending on a
single controlling factor.
WHO IS NOT AN EMPLOYEE?
Independent contractors are not employees. They are
engaged in a separately established, bona fide business
and have a profit or loss motive. They usually contract
to perform a specific task and have the right to control
the manner the work is to be accomplished. They have a
substantial investment in their business and customarily
perform services for more than one business. Generally
speaking, they are individuals who are not an employees
under the common law rules unless they are statutory
employees.
EMPLOYEE OR INDEPENDENT CONTRACTOR?
Tax decisions by the California Unemployment Insurance
Appeals Board (CUIAB) provide some guidance as to
whether workers in the taxicab industry will be classified
as employees or independent contractors.
In Santa Cruz Transportation, Inc. v. Unemployment
Insurance Appeals Board (1991) 235 CA 3d 1363;
1 Cal Rptr 2d 641, the Appeals Court held the drivers who
paid the taxicab company a fixed-fee to lease a taxicab
were common law employees of the company.
The Appeals Court found the following were indicators of
employment:
• The terms of the lease allowed the company to
terminate the drivers.
• The drivers could be terminated under the lease
agreement if they did not maintain good relations with
the public.
• The lease agreement designated the time period when
the shift began and ended.
• The company had the right to coordinate their meal
breaks.
• The drivers were prohibited from using the taxicab for
personal use.
• The drivers were required to accept charge slips from
certain customers.
• The company maintained a dress code.
• The company required the drivers to account for the
fares they received by maintaining trip sheets. There
was no evidence that the city required the drivers to
maintain trip sheets.
• The work did not require the expertise of a skilled
professional.
• The drivers depended on the company’s dispatcher for
their livelihood.
• The drivers did not set their own rates, but were paid
according to the number and distance of fares they
carried. There was no evidence of entrepreneurial
risk.
• The company owned the taxicabs and municipal
taxicab license. The taxicab company operated a fleet
of cabs for public carriage.
• The customers called the company and the company
arranged for the performance of the services.
• The taxicab company’s name was on the taxicab.
• The drivers did not advertise their services.
• The driver’s work was part of the regular business of
the taxicab company.
The above-mentioned case may not encompass the
entire set of factors used by the CUIAB in establishing an
employee or independent contractor status in the taxicab
industry and is presented here as an example only. The
Employment Development Department (EDD) and the
CUIAB will determine status on a case-by-case basis by
applying the applicable CUIC sections to the specific facts
existing in a particular working relationship.
DE 231TC Rev. 6 (9-17) (INTERNET) Page 2 of 3 CU
ADDITIONAL INFORMATION
For further assistance, please contact the Taxpayer
Assistance Center at 888-745-3886 or visit the nearest
Employment Tax Office listed in the California Employer’s
Guide, DE 44, or access the EDD website at
www.edd.ca.gov/office_locator/.
The following EDD resources are also available to help
determine the correct classification of the workers.
Employment Determination Guide, DE 38
The guide has a worksheet that asks a series of “Yes” or
“No” questions regarding the treatment of workers to help
determine if a worker is most likely an employee or an
independent contractor and whether you need to seek
additional guidance. To obtain this guide, access the EDD
website at www.edd.ca.gov/pdf_pub_ctr/de38.pdf.
Determination of Employment Work Status for Purposes
of State of California Employment Taxes and Personal
Income Tax Withholding, DE 1870
The form provides a series of questions regarding the
working relationship between the firm and the workers.
After the form has been completed and returned, the
EDD will send a written determination stating whether
the workers are employees or independent contractors
based on the facts provided. To obtain this publication,
access the EDD website at www.edd.ca.gov/pdf_pub_ctr/
de1870.pdf.
The EDD is an equal opportunity employer/program.
Auxiliary aids and services are available upon request to
individuals with disabilities. Requests for services, aids,
and/or alternate formats need to be made by calling
888-745-3886 (voice) or TTY 800-547-9565.
This information sheet is provided as a public service, and is intended to provide non-technical assistance. Every attempt has been made to provide
information that is consistent with the appropriate statutes, rules, and administrative and court decisions. Any information that is inconsistent with
the law, regulations, and administrative and court decisions is not binding on either the Employment Development Department or the taxpayer. Any
information provided is not intended to be legal, accounting, tax, investment or other professional advice.
DE 231TC Rev. 6 (9-17) (INTERNET) Page 3 of 3 CU
