On March 16, 2017, Lyft Inc. and over 200,000 current and former drivers reached a $30 million settlement in a class action lawsuit. The plaintiffs, all current and former Lyft drivers, alleged that they were “employees” and not “independent contractors” under California law, and that in some cases, they had not earned the minimum wage during their time. Lyft drivers who drove an average of thirty hours a week will likely receive several thousand dollars apiece, while drivers who drove fewer hours will receive about $130. This ends a two year legal battle between the drivers and Lyft.

In denying the plaintiffs’ 2015 motion for summary judgment, Judge Vince Chhabria of the United States District Court for the Northern District of California wrote:

“And some Lyft drivers no doubt treat their work as a full-time job—their livelihood may depend solely or primarily on weekly payments from Lyft, even while they lack any power to negotiate their rate of pay. Indeed, this type of Lyft driver—the driver who gives “Lyfts” 50 hours a week and relies on the income to feed his family—looks very much like the kind of worker the California Legislature has always intended to protect as an “employee.””

However, the court declines to classify Lyft drivers as either employees or independent contractors. While the settlement agreement does not address the issue, the earlier 2015 order stated that the traditional tests for determining whether one is an employee or independent contractor may not juxtapose well to Lyft’s situation. Absent a legislative determination, Judge Chhabria left the classification question to a jury:

“As should now be clear, the jury in this case will be handed a square peg and asked to choose between two round holes. The test the California courts have developed over the 20th Century for classifying workers isn’t very helpful in addressing this 21st Century problem. Some factors point in one direction, some point in the other, and some are ambiguous. Perhaps Lyft drivers who work more than a certain number of hours should be employees while the others should be independent contractors. Or perhaps Lyft drivers should be considered a new category of worker altogether, requiring a different set of protections. But absent legislative intervention, California’s outmoded test for classifying workers will apply in cases like this. And because the test provides nothing remotely close to a clear answer, it will often be for juries to decide. “

Lyft and Uber, the popular ride-sharing phone applications, both classify their workers as independent contractors. Uber currently faces lawsuits in California and Massachusetts. Whether either Uber case goes to trial will be important to watch. A change in the classification of ride-share app services, in addition to other ride-sharing services will affect the cost of these services to consumers in addition to the viability and profitability of these companies.

Over 1.5 million drivers currently drive for Uber; over 700,000 drivers currently work for Lyft. Uber provides over 40 million rides per month. Uber and Lyft boosted the sharing economy into high gear. For example, Grubhub and Postmates workers deliver food from restaurants that otherwise do not deliver to hungry customers. Shipt is a grocery delivery app that deploys shoppers to go to the grocery store, purchase designated groceries, and deliver them to the customer’s home. Shipt boasts delivery times of “as soon as one hour after your order.”

The classification question will likely most summarily be resolved by legislatures, as opposed to courts.  The classification question will affect millions of workers nationwide, some of whom work for these services as a means to earn a little extra cash on the side, others who rely on the work to put food on the table.

Vid Sankar

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