Judges May Deflate Massive Opportunity By Declaring Uber, Lyft Drivers 'Employees' Rather Than Independent Contractors

Innovation

from the this-won't-help-anyone dept

There are two big lawsuits that had hearings last week in California concerning how the car hailing (since some people get upset at the term “ride sharing”) services Lyft and Uber operate. Both companies insist that what they provide is, in effect, a service marketplace, in which buyers (riders) and sellers (drivers) can connect (at preset prices) for rides. Under such a setup, the drivers have always been considered independent contractors who are using Lyft and Uber to find riders. Yet in both of these lawsuits drivers are trying to get themselves declared employees of the company, rather than independent contractors. So far, that argument seems to be winning as Judge Vincent Chhabria in the Lyft case on Thursday and Judge Edward Chen in the Uber case on Friday indicated that the drivers have a strong case.

In the press, many have focused on the emails that were revealed in the Uber case (which Uber sought to block, claiming they were trade secrets), in which Uber employees gleefully and profanely discuss banning bad drivers. The drivers argue that this shows that Uber had the ability to terminate their employment, making them more like employees. But that doesn’t make much sense, and if true, it could present problems for all sorts of online services. Plenty of sites, from eBay to Yelp to Twitter all involve outside users making use of their platform — where the companies have the right to terminate their use of the platform, but that doesn’t make the users “employees.”

The IRS Guidelines on the difference between an independent contractor and an employee, under my reading, seem to clearly indicate these drivers are independent contractors. They set their own hours. They provide their own equipment. They decide how to go about completing the job.

This case, in many ways, reminds me of similar attempts to have independent users declared employees. Not too long ago, some Yelp reviewers sought to be declared employees. And, back in 1999, a bunch of AOL volunteer chat room monitors sued to be declared employees of AOL. AOL eventually paid up to settle that lawsuit, but all of these kinds of cases threaten internet platforms like these. When users of those platforms can suddenly demand to be called employees — with all of the related salary and benefits associated with such, it creates tremendous liability for these platforms, and makes the entire internet, and the various services it provides less useful.

The drivers in these cases are relying on a recent precedent of FedEx drivers being declared employees, rather than independent contractors, but in that case, it actually makes more sense. The drivers are wearing FedEx uniforms, and often driving FedEx provided vehicles — and even there, the rulings in FedEx cases across the country have been mixed (and the cases are still going).

There certainly are companies that try to game the system to name people as contractors rather than employees, but in this case, rulings against Lyft and Uber (no matter what you think of those two companies and their business practices) could result in some serious challenges for a number of really useful services that use the internet to enable great services to the public. One hopes, at the very least, that should these rulings go the wrong way, that the federal government and various state governments will, at the very least, update their rules for employee v. contractor classifications to make sure these services can survive.

Filed Under: california, car hailing, employee, independent contractor, labor, ride sharing
Companies: lyft, uber