Employees or Contractors? The Dispute Over Uber and Lyft Drivers

By Landon Maxwell

There is no good time for a business to be on the receiving end of a lawsuit, but the middle of a pandemic is an especially inconvenient extenuating circumstance. However, that is exactly the situation Uber and Lyft find themselves in currently. No stranger to lawsuits, Uber and Lyft both have faced legal challenges due to their classification of drivers as independent contractors as opposed to employees. The most recent challenge, however, comes from California. In May of 2020, the California Attorney General, along with a group of city attorneys, sued both Uber and Lyft for violation of Assembly Bill 5, which, though heavily lobbied against by the ride-share companies, went into effect January 1, 2020.1 The California Labor Commissioner’s Office also sued both Uber and Lyft for violation of the same bill just this August.2 

AB5 essentially took language from a landmark Supreme Court of California case, Dynamax Operations West, Inc. v. Superior Court, and made it a state statute. The court in Dynamax ruled that most workers are presumed to be employees, and that the burden of proof for classifying individuals as independent contractors rested with the employer. The statute specifically enshrined the so-called “ABC Test” from Dynamax.3

Under this ABC test, in order to legally classify a worker as an independent contractor, the company must prove that the worker is free from the company’s control, performs work outside the company’s primary business, and is regularly engaged in the trade the worker is hired for.4

In addition to claims that Uber and Lyft are violating this legislation by classifying their drivers as independent contractors, the lawsuit further alleges that the companies are engaging in unfair and anticompetitive business practices. The suit seeks civil penalties of $2,500 per violation and back wages for drivers. If Uber and Lyft are found to be in violation of AB5, they could be forced to pay millions of dollars in damages.5

Uber and Lyft are pushing back against the claim that their drivers are improperly classified. During a Congressional hearing in October of 2019, the companies raised several points defending the independent contractor status. Uber’s Vice President for Global Public Policy, Justin Kintz, stated, “There is no minimum commitment or obligation to work or to connect to the Uber app, and there are no required schedules or management.” According to Uber, 45% of drivers spend less than ten hours per week driving while Lyft makes even more dramatic claims, stating that 76% of their drivers spend less than ten hours per week driving. It is worth noting that both the U.S. Department of Labor and the National Labor Relations Board have both agreed that transportation network companies such as Uber and Lyft are properly classifying their drivers as independent contractors.6

In addition to arguing that their drivers do not fall under the statutory status of “employees”, Uber and Lyft maintain that it would actually negatively impact drivers to do so. Lauren Belive, the director of Public Policy at Lyft, stated, “[d]rivers have the freedom, flexibility and control to choose when to work, how much they work, how often they work, where to work and ultimately whether to log on at all . . . . [r]ideshare drivers have told us repeatedly that they do not want to lose this freedom, flexibility and control, and many would stop driving if forced into the confines of a traditional job that they have already chosen to avoid.”7

Ultimately, drivers face benefits and disadvantages under both classifications. Some drivers feel cheated out of benefits such as health care, paid time off and maternity leave by being independent contractors, while others fear losing flexibility and control over their schedules if they were to be classified as employees. It is easy to argue that Uber and Lyft’s supposed concern over their drivers’ flexibility is simply a facade, and that their real interest lies in not having to pay out millions in damages as the result of losing these lawsuits. And, while this is almost certainly the case, it does not mean that the points being made are invalid. Given the amount of time the average rideshare driver spends driving a week, a majority of drivers will not qualify for health benefits even if they were classified as employees, at least unless they substantially increase their driving hours, which may not be an option for many drivers. Furthermore, while being entitled to minimum wage seems like a huge benefit for drivers, it would most likely mean the elimination of “surge” and “power zone” bonuses for drivers, which could often push them far past the hourly minimum wage. While there may be no perfect choice for Uber and Lyft drivers, one thing is for sure: if Uber and Lyft lose these lawsuits, we will see massive changes in ride-sharing transportation moving forward.

  1. Kate Conger, California Sues Uber and Lyft, Claiming Workers Are Misclassified, The New York Times (May 5, 2020), https://www.nytimes.com/2020/05/05/technology/california-uber-lyft-lawsuit.html
  2. Department of Industrial Relations. (2020, August 20). Labor Commissioner’s Office Files Lawsuits against Uber and Lyft for Engaging in Systemic Wage Theft [Press release]. Retrieved from https://www.dir.ca.gov/DIRNews/2020/2020-65.html
  3. Anthony Zaller, Understanding the ABC Test for independent contractors in California, California Employment Law Report (March 29, 2019), https://www.californiaemploymentlawreport.com/2019/03/understanding-the-abc-test-for-independent-contractors-in-california/
  4. Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903, 232 Cal. Rptr. 3d 1, 416 P.3d 1 (2018)
  5. Makenna Kelly, California sues Uber and Lyft over alleged driver misclassification, The Verge (May 5, 2020), https://www.theverge.com/2020/5/5/21248347/california-uber-lyft-attorney-general-independent-employees
  6. Benzinga: Uber, Lyft Defend Independent Contractor Model on Capitol Hill (2019) Chatham: Newstex. Retrieved from http://login.ezproxy1.lib.asu.edu/login?url=https://www-proquest-com.ezproxy1.lib.asu.edu/docview/2311774517?accountid=4485
  7. Id.

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