Cotter v. Lyft.
In Cotter v. Lyft, a district court case involving similar facts as in Berwick v. Uber, the court acknowledged at the outset that Lyft drivers didn’t seem much like employees or independent contractors.[1] On one hand, the court noted, Lyft drivers, unlike typical employees, work as little or as much as they want and can schedule their driving around their other activities; on the other hand, Lyft drivers, unlike typical independent contractors, use no special skill when they give rides, and their work is central, not tangential, to Lyft’s business.[2] So how did the district court rule?
Like Uber, Lyft operates a smartphone app, through which passengers and approved drivers are matched.[3] At the time of this case, however, Lyft operated on a donation system, i.e., at the end of a ride, the rider could decide whether to accept the amount recommended by the app, pay a different amount, or pay nothing at all.[4] Lyft also provided several methods by which drivers could arrange to drive on a given day, either by: (i) submitting requests for particular hours one week in advance, subject to Lyft’s approval; (ii) by reserving any available hours, if it was less than one week in advance; or (iii) by logging onto driver mode at any time, without having a particular time slot approved or reserved, if Lyft determined that demand was not already being met by the drivers who already reserved.[5] Lyft’s Terms of Service, which drivers must accept, set forth similar, if not more detailed, requirements as the Uber agreement, such as “[n]o talking on the phone (unless it’s the passenger),” “[k]eep your car clean on the inside and outside,” and “[g]reet every passenger with a big smile and fist bump.”[6] Additionally, while the Terms of Service stated in several places that Lyft had no control over the quality or safety of the transportation or the actions or conduct of drivers or riders, they also told drivers that Lyft reserved the right to investigate and terminate drivers in its sole discretion.[7]
The plaintiffs in this case alleged that, because Lyft misclassified its drivers as independent contractors, they have been deprived of minimum wage, reimbursement for work-related expenses, and other protections afforded to employees under California law.[8] In determining whether Lyft drivers are employees, the court said the “principal” question “is whether the person [or company] to whom service is rendered has the right to control the manner and means of accomplishing the result desired.”[9] The company, the court added, need not exercise its full right of control for a worker to be deemed an employee, and employee status may still exist where “[a] certain amount of . . . freedom is inherent in the work.”[10]
Here, similar to Uber’s argument in Berwick v. Uber, Lyft tepidly asserted that there was no need to decide how to classify the drivers because they do not perform services for Lyft, an uninterested bystander of sorts that merely furnishes a platform that allows drivers and riders to connect, analogous perhaps to a company like eBay, in the first place.[11] The court, however, scoffed at this argument, saying that Lyft concerned itself with far more than simply connecting random users of its platform, marketing itself as an on-demand ride service and actively seeking out customers.[12] As for the degree of control, the court found that, aside from when and how often drivers work, Lyft retained a good deal of control over how drivers should conduct themselves, written as commands or prohibitions, rather than suggestions, as Lyft insisted, and by penalizing or terminating drivers who did not follow them.[13] As such, the court found it difficult to rule that the drivers were independent contractors when the most important factor for discerning the relationship under California law, namely, the right of control, tended to cut the other way.[14] The court also found, however, that many of the remaining factors, such as the great flexibility that Lyft drivers enjoy in when and how often they work, tended to negate the argument that the drivers were employees. Accordingly, the court held that the decision could only be made by a jury and ordered a trial, as some factors pointed in one direction, some in the other, and some were ambiguous,.[15]
Interestingly enough, the court wondered, in dicta, whether some Lyft drivers who work more than a certain number of hours should be employees, while the others should be independent contractors, or perhaps Lyft drivers should be considered a new category of workers altogether, requiring a different set of protections.[16]
We agree. In this new era of sharing economy, there seems to be a growing need for new regulations for companies like Uber and Lyft. The reality, however, is that laws typically follow innovation, not the other way around. So employers, even if their circumstances are unique, need to try to figure out which of the old boxes they fit in. Are the people doing work for the employer employees or independent contractors? In close calls, a court could decide either way (see how the court is suggesting some Lyft workers could be in one box or another) and employers must understand and manage this risk.
This post was a part of a multi-post blog series on whether Uber and Lyft drivers are employees, as opposed to independent contractors, under California law. You can find the other posts by searching our blogs at www.mcbrideattorneys.com. If you have any questions about the content of this blog series or other issues not discussed here, please contact us.
This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.
Steps have been taken to verify the contents of this article prior to publication. However, readers should not, and may not, rely on this article. Please consult with counsel to verify all contents and do not rely solely on this article in planning your legal transactions.
About the Author
Shawn McBride – R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Office, P.L.L.C. which helps clients in legal issues related to starting companies, joint ventures, raising capital from and negotiating with investors and outside General Counsel functions. Shawn can be contacted at: 407-517-0064; [email protected], or www.mcbrideattorneys.com.
[1] Cotter v. Lyft, 13-cv-04065-VC (N.D. Cal. Mar. 11, 2015), at 1.
[2] Id. at 1–2.
[3] Id. at 3.
[4] Id.
[5] Id. at 4.
[6] Id. at 6.
[7] Id. at 5.
[8] Id. at 7.
[9] Id. at 10 (emphasis added).
[10] Id. 10–11 (internal citation omitted).
[11] Id. at 14.
[12] Id.
[13] Id. 14–15.
[14] Id. 16.
[15] Id. 19.
[16] Id.