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Lyft Drivers Get a $12 Million Lift, But Are Still Not Employees

Emanuel Shirazi
Update February 3, 2016

Good news for Californians using Lyft. Lyft recently settled a class action lawsuit that gives drivers additional workplace protections without classifying them as regular employees—which likely would have devastated its business model. This is also good news for other startups who rely heavily on the unique contractor employee business model.

Lyft drivers got some good news too.  Here are some of the benefits drivers will now receive:

  1. Lyft will pay out $12.24 million to affected drivers.
  2. Lyft must give employees notice if they are no longer allowed to be drivers any longer.
  3. A driver cannot be deactivated unless he or she is given a specific reason such as having a low passenger rating.
  4. If a driver is deactivated, the driver will be given an opportunity to dispute the decision. Lyft will pay for the arbitration for the driver to do so.

While drivers are still not technically considered employees, the benefits listed above are a significant improvement. Though Lyft will incur some costs with the introduction of the new benefits, classifying drivers as employees would have been much more costly for the company.

Uber drivers will have to wait until June to find out if they will be considered employees or independent contractors.

Do you think this settlement will have an impact on the pending Uber case or other ride-share cases throughout the U.S.?  

If Uber loses its case, would this make Lyft the king of California ride sharing?

Update September 2, 2015

This past week, a San Francisco judge granted three Uber drivers class-action status in a lawsuit against the ride sharing company. The three drivers want to be classified as employees versus their curent status as independent contractors. In addition, they are also seeking reimbursement for fuel and other costs related to their vehicle’s wear and tear. Uber will most likely appeal this claim due to the fact that most drivers provide service on their own time and don’t have set schedules. Whatever the outcome may be, one thing is for sure, this issue isn’t going away any time soon. Just this past month, the National Labor Relations Board broadened their definition of what an “employer” is. They determined that “subcontractors” are actually “joint employers of workers.”

Update June 17, 2015

On June 17, 2015, a California labor commissioner ruled that Uber drivers should be considered employees and not independent contractors. The commissioner explained that the decision was based on the fact that Uber is “involved in every aspect of the operation.” The news could be detrimental to Uber and other companies with similar business models in the state of California. But, the ruling is not binding on other labor commissioners or on the court system. In fact, other labor commissioners have ruled the other way.

Original Post:

In two separate class action lawsuits, drivers for Uber and Lyft are seeking to be classified as employees instead of independent contractors.  The plaintiffs of both cases are hoping to be reimbursed for expenses such as gas and car maintenance.  If the drivers are successful, they would also get benefits and protection in the form of worker’s compensation, payroll taxes, health care, social security taxes, and unemployment insurance.

Because drivers are told how much they can charge per ride, and hey risk being fired if they don’t obey the rules, they feel that they should be considered employees. In addition, if a driver gets injured while working, neither Uber or Lyft has to assume any liability.

Uber and Lyft feel differently, however. They argue that their drivers have many liberties that traditional employees do not. For example, drivers have the ability to work as many hours as they want, whenever and where they want, making this type of employment ideal for those seeking flexibility to pursue other endeavors.

The outcome of these cases would not only have an impact on the ride sharing marketplace but also companies such as TaskRabbit and Airbnb.

Do you think Uber and Lyft drivers should be considered independent contractors or employees?

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