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U.S. District Court Denies Summary Judgements in Uber, Lyft Misclassification Cases


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Last week, federal judges heard class action lawsuits against Lyft and Uber that were brought forward by drivers who claim they are being misclassified as independent contractors.  The cases were heard in the U.S. District Court for the Northern District of California.  In both cases, the companies filed motions seeking summary judgement on the grounds they were properly classifying their workers.  The requests were not granted.

These important cases have a chance to shake up the “on-demand economy” which relies heavily on the independent contractor model. If the drivers are found to be employees, changes could soon be made across a wide array of industries from information technology to drayage trucking.

An analysis of the two cases come from Pepper Hamilton LLP’s Richard Reibstein:

The Uber case was decided by Judge Edward M. Chen and the Lyft case by Judge Vince Chhabria. The decisions are very similar, with both judges concluding that some of the facts favored employee status and some favored IC status. Although both judges identified more factors favoring employee status, Judge Chhabria put it best when he wrote that “Lyft drivers don’t seem much like employees . . . [but Lyft drivers don’t seem much like independent contractors either.” In these circumstances, both judges concluded that, because neither of the defendant companies could establish that their drivers were ICs as a matter of law, a decision could only be made by a jury after weighing all of the facts and circumstances. (In the Lyft case, Judge Chhabria also denied the drivers’ cross-motion for summary judgment that they were employees as a matter of law.)

The facts in both cases have a number of similarities. Both Uber and Lyft allow drivers to make themselves available for work whenever they want and allow them to accept or reject rides once they have been selected — both factors that favor IC status. On the other hand, both companies expressly reserve the right to either terminate a driver’s relationship or to terminate use of the company app if a driver’s customer ratings are deemed unacceptably low or for any reason at all. Both courts noted that this factor is a key one favoring employee status.

Both judges stated that, while there are numerous factors that bear on whether a worker is an employee or an IC, the “principal” test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired. To that end, the court in the Uber case identified other factors favoring employee status, including Uber’s “Driver Handbook.” The handbook provides instructions for drivers on dress codes, communication with clients, use of a car radio and availability of an umbrella in their cars.
Among the drivers many arguments in favor of their employee status is that they could be punished for violating these guidelines.  

While it seems that early momentum belongs to the drivers, lawyers for Uber argued in their court documents that two recent independent contractor cases in the state of California have been won by management.  In those cases, the court noted that the workers were independent contractors although “some factors may have cut in favor of employee status.”

There is still no guarantee that the cases will go to trial.  Uber is likely to argue that an arbitration clause its drivers sign prohibits them from participating in a class action suit.  As Shannon Liss-Riordan, the plaintiffs’ attorney in both cases, told the Wall Street Journal:

“When Uber stuck this arbitration clause in an attachment that workers swipe on their smartphone, no one read it,” Liss-Riordan says. “No one reads these things.”

Liss-Riordan said that her law firm was prepared to have plaintiffs appear individually if need be and that no settlements have been discussed as of yet.

For Uber specifically, the case adds to mounting legal woes.  Another class action suit is moving forward which claims a data breach of information exposed nearly 50,000 of its drivers.  Other lawsuits against the company have stemmed from passengers that were assaulted by their drivers in Chicago, Washington DC, Boston and other cities.  


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