Lyft, Uber Drivers Shouldn't Be Treated Like Employees

Ride-sharing companies simply don't control drivers like bosses control workers.


Credit: Janitors / photo on flickr

Recently the ridesharing company Lyft, Uber's largest competitor, settled a pending lawsuit for $12.25 million. Lyft can continue to classify its drivers as independent contractors—a designation that is crucial to the sharing economy's success. But the settlement may lead to additional difficulties for other sharing-economy companies.

The lawsuit, Cotter v. Lyft Inc., was a class action filed in the Northern District of California. The plaintiffs were Lyft drivers who claimed they were incorrectly classified as independent contractors instead of employees. Because of this, they argued that Lyft had to cover their driving expenses, pay additional wages, and provide employment benefits.

Any Lyft driver who completed at least one ride in California between May 25, 2012 and the settlement approval date will be counted as part of the settlement class. Though exact numbers are not yet known, Ted Frank, the director of the Center for Class Action Fairness, estimates that after legal fees each driver will receive less than $100.

Lyft also agreed to update the section of its terms and conditions that cover dismissing drivers to make them more specific. Previously, the company could take drivers off its platform for any cause.

One reason that the plaintiffs agreed to settle with Lyft was that they were "mindful of the inherent challenges of proof and the strength of the defenses to the alleged claims." Although recent National Labor Relations Board and Labor Department guidelines have muddied the waters, current labor law holds that ride-sharing drivers are independent contractors, not employees. Lyft and other sharing-economy companies do not control their workers' hours and other important facets of the job, so drivers are independent. Many drivers have other jobs, and Uber is the main source of income for only 20 percent of its drivers.

Because ridesharing drivers are categorized as independent contractors, the plaintiffs are not entitled to any of their demands under California and U.S. law. In order for Cotter to win, drivers would have had to be determined to be employees by the court, something that was not done.

There is little from this development that can apply to other similar lawsuits. As the settlement makes clear, "There has been no final determination by any court as to the merits of the claims asserted by Named Plaintiffs against Lyft, nor has there been any final determination as to whether a class should be certified, other than for settlement purposes only." In other words, this settlement should not be used to determine future employment classification court decisions—but it probably will be.

Though there is no legal precedent set by the settlement, other sharing-economy companies will face increased pressure to settle when they face class action lawsuits. This will raise the costs of sharing-economy services, costs that will be passed on to consumers.

Uber is involved in a similar California class action lawsuit O'Connor v. Uber Technologies Inc. Uber has a higher chance of losing this case since the judge rejected the company's arbitration agreement with its drivers. This type of arbitration agreement helped to facilitate Lyft's settlement.

Flexibility is vital to the sharing economy. While some workers use these platforms full time, the vast majority use them for part-time work or supplemental income. About eight in 10 Lyft drivers choose to drive 15 hours a week or less, and half of Uber drivers use the platform for less than 10 hours a week. Independent contractor status allows the decision of when or for how long to work to be controlled by drivers.

Unlike employees, independent contractors are not entitled to minimum wage, overtime pay, unemployment insurance, or workers' compensation. But extending these employment protections that were sought by the plaintiffs makes little sense. Since Lyft and Uber do not control workers' hours, and determining how much someone is actually working solely for the companies is difficult (if not impossible), minimum wage and overtime pay requirements are inapplicable to the companies' workers. Additionally, one of the benefits of the sharing economy is that supply can easily fluctuate to meet an ever-changing demand.

Sharing-economy work is often transient or done in addition to other jobs, so there is little reason to compel Lyft and Uber to fund unemployment insurance benefits. Ridesharing drivers also work off-site and use their own vehicles. Hence, companies should not be required to provide workers' compensation.

Many independent contractors would prefer to have access to some portable benefits. Portable pensions already exist in the form of Individual Retirement Accounts and Simplified Employee Pension Plans. Portable health insurance, although expensive, exists through the Affordable Care Act. Social Security provides disability insurance. Regulators should encourage insurance companies to offer broad plans to meet professionals' needs.

The Labor Department and the National Labor Relations Board are trying to change the previously-clear distinction between employees and independent contractors. This leaves courts with the impossible task of dealing with these two agencies' guidelines as lawsuits work their way through the courts. This uncertainty harms many companies and their workers, both inside and outside the sharing economy. Congress should pass a law clarifying the issue before these lawsuits grow out of control.

The sharing economy's growth is a bright spot in today's tepid economy. Workers value the freedom and flexibility that partnerships with sharing-economy companies provide. Congress needs to wake up to the realities posed by a 21st century economy and use its powers to rein in the Labor Department and National Labor Relations Board. Lyft's settlement does nothing to achieve this goal, nor will future legal battles. 

NEXT: Colorado Man Had Charges Dismissed for Two Separate Bank Robberies, Refiled After He Complained, Plus More Charges Because Fuck You That's Why

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  1. All your ‘new economy’ is belong to us.

    /the government

  2. The idea here was to transform ride sharing services into cab companies, thus making it less attractive for workers and consumers as an alternative to traditional cabs.

    1. The idea is to streamline tax collection and regulation.

      Every other objection to the Uber/Lyft is mere sophistry.

      1. That’s a big part of it, sure, but the backbone of these objections are from taxi cartels who’ve had an entrenched monopoly for decades and have watched it vanish overnight because people literally couldn’t wait to never have to deal with them again and enthusiastically embraced the first viable alternative. Their primary goal is to make Uber as shitty as their services have always been. It’s about eliminating competition.

        Of course the professional left has jumped onboard, and their goal is of course regulation, tax collection, and eventually unionization. But we shouldn’t forget that it’s all in service to shitty, scumbag industry that literally everyone hates.

        1. i agree thats what’s happening, but if they’re taxing and regulating, etc., with the goal of making uber as shitty as traditional taxis, isnt that a tacit admission that that’s what taxes and regulation do? i wouldnt expect them to say that, but do they realize it?

          1. Yes, I’d say most of them realize it. Aiming for an objectively worse society is the goal of progressivism, as long as it’s equitably distributed misery. That’s what they call social justice. We can all be equally miserable.

            If crushing Uber puts people out of work and lowers the quality of car services for everyone, then it’s a victory for progressives because it means that rich people don’t have their fancy taxis, some drivers don’t make more than others, and the billionaires at the top of it all lose their revenue. Win/win/win!

  3. Has there ever been a more beautifully constructed scam than the class-action lawsuit? Some lawyer you’ve never met files a suit on your behalf that you have to actively opt out of, and you end up with a gift card for $4.23 for the very company that supposedly wronged you while the lawyer makes off with millions.

    1. $4.23? Sounds like you’ve gotten in on some pretty sweet deals, Hugh.

      1. It’s the least Netflix could do after apparently ruining my life.

    2. It seems like the lawyer should not be able to lay any claim to the funds won by the class-action lawsuit without first signing a contract with the people he/she is suing on behalf. I guess no lawyer has taken it to court because they’d end up debarred for daring to hurt the money flow, but you’d think some congress critter might consider it.

      1. Congress critters are what, 95%? lawyers.

    3. There IS a good side to class-action lawsuits–they do change/deter corporate bad behavior (though still subject to the law of unintended consequences). To a libertarian, class-action lawsuits are preferable to new legislation, regulation or executive action (bans).

    4. They don’t all suck. Just most of them.

      A class action suit forced GM to reimburse me for a repair to my braking system.

      Another one would have forced Audi to reimburse me had I been clairvoyent enough to document the failure prior to the lawsuit. I was punished for not being able to afford a repair to my instrument cluster, and there was no grace period for reporting the defect after the settlement.

    5. Not all class actions end up getting you coupons. I’ve worked on class actions that net class members five figures, and I know of class members who have received six-figure awards. It depends on the type of claim, the size of the class, and the size of the settlement.

  4. “It’s a race to the bottom,” said Bhairavi Desai of the New York Taxi Workers Alliance, which also organizes Uber drivers.

    WTF? “Nice gig you got there….” I’m hoping the vast majority of Uber drivers are telling her to shove her fucking union bullshit where the sun don’t shine.

    1. My dad is an Uber driver in NYC, and many of them are indeed.

  5. How about stop treating any contractors or temporary workers like employees across the board, regardless of whether part of the “sharing” economy?

    1. only if we drop the “You must do this that and the other for ’employees’, even if they agree to forego it.”

    2. There’s also the small problem that certain occupations are granted a government monopoly.

  6. Independent or not, Uber drivers should be more pissed at Uber’s heavy cut (about 25% for doing hardly nothing) and “no tip” policy which produces driver earnings at about 60 cents per mile, hardly enough to cover operating costs for most vehicles. But hell yes, I’ll take Uber taxis over regular taxis any day at the expense of the poor driver’s vehicles! It’s still a good deal even with a tip!!

    1. UberX is $1/mile. Drivers should gross 75 cents.

      Makes sense as a part time job for someone whose car payment and insurance are a sunk cost.

      If we assume a lease is 25 cents a mile, gas is $2/20mpg = 10 cents a mile. Net is 40 cents a mile if we conveniently ignore oil changes and tires. I have no idea how many miles an uber drive typically bills per hour.

      1. “should gross 75 cents”,

        But in spread out cities like the one I drove in, the mileage incurred to pick up drivers was a substantial portion of total mileage. Throwing me a tip may have kept my earnings in the black. Tip your drivers!!!!

        1. “pick up drivers” s/b “pick up riders”

    2. Uber drivers should be more pissed at Uber’s heavy cut

      Except for the part where this cut was put in place in other cities and everybody wins.

      hardly enough to cover operating costs for most vehicles

      Well then they can find something else to do, because driving people around for free would be kind of stupid.

  7. just before I saw the receipt that said $7527 , I accept that my mom in-law woz like actualey making money in there spare time from there pretty old laptop. . there aunt had bean doing this for less than twentey months and at present cleared the depts on there appartment and bourt a great new Citro?n 2CV . look here…….
    Clik This Link inYour Browser.
    ???????? http://www.Jobstribune.com

  8. If Uber is just a software company and Uber drivers are just independent contractors then the drivers themselves should be determining the rates at which they’ll drive passengers. Since this is obviously not the case and Uber slashes prices on a whim so invariably people will argue that a model like that wouldn’t work. No it wouldn’t work because Uber drivers are not independent contractors.

    In some states including California, an independent contract is someone who engages in work distinct from the principal purpose of the company. Could any argue that the principal purpose of Uber is something other than transportation and that their service could continue operating without independent contractors. As you said it, independent contractor model is critical to Uber’s operation so the work done by its contractors is the absolute opposite of distinct.

    To the Jared Meyers out there that think they should weigh in on the subject, try your hand at some investigative journalism and do a 100 Uber pickups. You’ll enjoy such classics like, “I didn’t realize the ‘pickup location’ is where you’re expecting to pick me up” and my favorite of all “I promise I wont puke in your car”.

  9. My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can’t believe how easy it was once I tried it out. This is what I do,

    go to tech tab for work detail,,,,, http://www.onlinecash9.com

  10. (1/2)

    This latent pants-shitting over “independent contractor” status really scares me.

    I do a lot of freelance writing jobs online (I swear I’m not a spammer) from sites that operate much like Uber: they connect content buyers with writers who are willing to write the article to the buyers’ specifications. I don’t like the idea that this movement against alleged misclassifying of employees might spill over out of the ride-sharing business. I may not be making $92,858 working 3 hours a week from my laptop, but this writing stuff is a backup plan in case something happens with my job, and it’s also a way to make extra money whenever I have a few hours to kill. Since we’ve compared the prices we get for articles and the prices advertised to buyers, we know what cut the company is taking, and I don’t think they’re operating with enormous profit margins. If they were forced to give their writers health insurance or pay at least minimum wage, it would torpedo the entire business model.

    1. (2/2)

      But when the “progressives” look at the situation through their lens of distortion, they see an evil corporation forcing people to work for pitiful wages. Nevermind that every single person affected by this is a totally willing participant, or that it’s entirely possible to make $40 per hour during periods of high demand, or that writers work as much or as little as they want and can’t really be called “employees” by any stretch of the imagination.

      None of that matters to “progressives”. They just want to give a smackdown to a corporation and send a message to the proles that working for extra money in some “unregulated” industry will not be tolerated.

  11. ??My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can’t believe how easy it was once I tried it out. This is what I do..
    Clik This Link inYour Browser??….
    ???????? http://www.Jobstribune.com ?

  12. I’m an Uber driver, and I have no beef whatsoever with being an independent contractor. It’s how it was spelled out in the contract, after all. Plus I feel like if I said I’m an employee, they’d be all “you have to work certain hours a day and a minimum amount of hours a week.” And I’d be all “No.” And then I’d still be unemployed but now not making any money

  13. Indeed, the sharing economy is attractive to consumer and drivers alike. However, unless Congress updates federal legislation that defines worker classification of independent contractors/employees; app based service companies such as Lyft and Uber are breaking the law.
    Lyft and Uber set the fees that the drivers can charge, demand that the drivers accept fares without full knowledge of final destination while requiring that drivers carry their own personal insurance to serve a commercial enterprise. This absolute direction and control of the driver is the definition of employee. This settlement is an insult to Lyft drivers and a mere band-aid while the same lawyer that went after Lyft prepares the bigger case against Uber.

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