Two federal lawsuits brought by a Boston labor attorney are going to trial thanks to rulings by federal judges in California last week — with vast implications for Uber and Lyft.
"The judges soundly rejected the companies' arguments that they are not in the car business, they are a technology business," said Shannon Liss-Riordan, the attorney who brought the suits.
Two judges both denied a motion for summary judgment, ruling that the cases would have to be decided by juries.
The suits center on how Uber and Lyft classify their drivers. The companies claim the drivers are independent contractors, but Liss-Riordan and her clients say the drivers should be treated as full employees. By classifying drivers as independent contractors, Uber and Lyft avoid having to pay for benefits including unemployment insurance, worker's compensation and overtime. If the companies are required to pay their drivers as employees, it would mean a huge change to their business model.
"Companies like Uber and Lyft save enormously on their labor costs by calling their workers independent contractors," she said.
The problem, the two federal judges said separately, is that neither the legal definition of employee or contractor seems to describe Uber and Lyft drivers.
Uber and Lyft drivers can choose their own hours and accept or reject ride requests, like independent contractors. However, like employees, the drivers are subject to control and potential termination at will by the ride-for-hire companies.
"The jury in this case will be handed a square peg and asked to choose between two round holes," Judge Vince Chhabria wrote of the Lyft case.
"The application of the traditional test of employment — a test which evolved under an economic model very different from the new 'sharing economy' — to Uber's business model creates significant challenges," wrote Judge Edward Chen in the Uber case. "Arguably, many of the factors in that test appear outmoded in this context."
The lawsuits will only apply to California right now, but another case that would apply to Massachusetts is ongoing. The companies have come under fierce fire in Massachusetts, largely by taxi companies and cab drivers who claim they are being driven out of business.
Traditional employment laws have a long way to go to catch up with the rise of the so-called gig economy, said Pat Petitti, chief executive of HourlyNerd, which connects freelance consultants with companies looking for outside expertise.
"Neither the employee or contractor definition fits what an Uber driver does," he said. "The traditional definitions for an employee and contractor are not correct — they don't work in a world like this, where technology is changing the workforce."
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