By Rachel Emma Silverman
Lyft drivers must keep their vehicles "100% clear" of clutter
and offer passengers a fist-bump when they entered the car,
according to that company's "Rules of the Road." Drivers for rival
Uber Technologies Inc. can be "deactivated" for passenger ratings
that fall below 4.5 on a five-point scale, according to internal
company emails.
But do such rules for conduct and performance make drivers
employees of those firms?
That question is at the heart of separate lawsuits in federal
court in San Francisco last week, in which two district court
judges indicated skepticism that drivers for the two car services
should be considered independent contractors. The companies claim
the workers are independent contractors, not employees.
Both suits, which seek class-action status, make a case that the
drivers should be reimbursed for expenses such as gas and car
maintenance that they currently pay out of pocket.
Uber and Lyft, which both declined to comment on the cases, are
seeking to have the suits dismissed, and rulings in both are
expected later this year. Should either judge allow a case to go
before a jury, the resulting verdict could set a legal precedent
about how on-demand workers should be classified in the so-called
app economy.
Current labor regulations recognize two types of workers:
employees in traditional work relationships and independent
contractors. Employees are generally covered by protections such as
minimum-wage and antidiscrimination statutes, workers'
compensation, and union-organizing rights, while the latter have no
such protections.
More firms rely on thousands of contract workers to serve as
drivers, run errands or do data-entry at the swipe of an app. Firms
often prefer independent contractors, because they are not subject
to certain tax and legal liabilities and can cost firms less in pay
and benefits.
At the Lyft hearing in San Francisco federal court last week,
U.S. District Judge Vince Chhabria said that current employment
categories are "woefully outdated" when applied to app-enabled
firms such as Lyft, according to media reports.
Both district court judges indicated they were likely to let the
suits proceed. In the Lyft case, Judge Chhabria indicated that
previous California cases found that other workers performing
similar work to that of Lyft drivers were considered to be
employees, rather than contractors.
Plaintiffs suing Uber argue that they should be treated as
employees because the company exerts significant control over their
work, sets compensation and vehicle standards, and can terminate
drivers at will. As part of the case, Uber was forced to release a
series of internal emails on driver termination to the court.
Judge Edward Chen, who heard the Uber suit, voiced skepticism
about the firm's claims that it wasn't an employer, but rather a
technology company that licenses its app to drivers. According to a
local media report, he questioned why Uber set fares and screened
and fired drivers.
As the cases stand now, any ruling or verdict would only apply
to the companies' drivers in California, but a finding for the
plaintiffs could be costly for both companies, forcing them to pay
drivers' gas and maintenance expenses, and possibly additional
payroll expenses including social security, workers' compensation
and unemployment insurance.
Most employment suits settle, said Samuel Estreicher, who
teaches employment law at New York University Law School. However,
he doubts these cases will settle quickly because doing so may mean
changing their business models, and paying workers more, he
said.
Uber is currently valued at some $41 billion, receiving venture
funding from firms including Benchmark, Google Ventures and Menlo
Ventures, while its smaller rival Lyft is valued at $700
million
Last year, an appeals court ruled that FedEx Corp. incorrectly
classified as contractors some delivery-truck drivers who were
required to wear FedEx uniforms, drive company vehicles and groom
themselves according to the company's appearance standards.
The plaintiffs' attorney in the Lyft and Uber cases, Shannon
Liss-Riordan, an employment lawyer with Lichten & Liss-Riordan
PC in Boston, also represented FedEx plaintiffs in a similar 2013
case in Massachusetts.
About 34% of the labor force, or 53 million Americans, work in
some form of contingent arrangement, according to a 2014 report
written by the Freelancers Union and Elance-oDesk Inc., an online
marketplace for freelance work.
In a recent study, Uber counted about 162,000 "active drivers"
in December, but the company doesn't disclose the total number of
drivers registered on the platform.
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