The sharing economy has seen its fair share of lawsuits. And apparently, it’s going to pay its fair share too.
Last week a U.S. District judge rejected an agreement between Lyft and lawyers representing drivers for the ride-sharing app, on the grounds that the agreement was unfair to both the drivers and the state of California. Though the ride-sharing economy has suffered a few legal setbacks amidst the sea of lawsuits filed against them, few have set much precedent. But if there’s any major takeaways from this case, it’s that courts seem to be uninterested in letting Lyft and its ilk off with just paying fines.
It’s not even as if the payment would’ve been nothing; the proposed settlement would require the app company to pay $12.25 million, ending Lyft v. Cutter. According to the plaintiffs’ lawyers, this was an acceptable cut of the $64 million that drivers deserved for mileage reimbursements they would have received as employees.
But U.S. District Judge Vince Chhabria disagreed. By his calculation—using the drivers’ methodology—they were owed closer to $126 million. Additionally, Judge Chhabria found the claim for penalties under the Private Attorneys General Act (PAGA) to “make no sense,” stating it as an “arbitrary calculation [that] may have short changed the State of California (not to mention the drivers) even more.”
In Chhabria’s eyes there was a level of compensation not being met. And as Ars Technica reports, non-monetary terms of the settlement weren’t making up for that enough, even if the he’s uninterested in having the court grapple with the bigger employment questions around Lyft drivers:
The relatively low sum of money could be explained away if the non-monetary terms of the settlement were significant, Chhabria notes. But they aren’t. The lawsuit claimed that Lyft drivers were really employees who had been misclassified as independent contractors and said they weren’t properly paid for their expenses, among other things. Those things won’t change under the proposed agreement, which instead focused on when and how Lyft can terminate drivers.
The Teamsters union, which is seeking to represent Lyft drivers, also objected to the settlement, saying that it should have changed the drivers’ classification to employees. Chhabria mostly discounts the Teamsters’ claims, saying they are policy concerns better directed to the legislature. He says the union’s assertion that the changes are “largely illusory” is likely an overstatement. “The changes aren’t revolutionary, but they are not nothing, either,” Chhabria writes.
Chhabria’s opinion doesn’t seem to believe that these problems can’t be remedied, just that $12.25 million, which would pay about $53.02 to part-time drivers in the class and $679.19 to full-time ones, is far too low for this settlement.
And whether it’s in Seattle or Pennsylvanaia, more and more regulatory bodies are acting similarly. Uber, Lyft, and other sharing apps clearly have some sort of demand. And while courts are concluding that they are unable to help dissuade the gray areas entirely, they seem to be at least ensuring that employers operating in that space are not doing too wrong by their employees. As Daniel V. Kitzes writes on Employment Law Worldview, some of that is because the Department of Labor has made it a priority as of late:
Investigating workers misclassified as independent contractors has become an important agenda item for the Department of Labor (DOL). The DOL issued guidance only six months ago explaining “most workers are employees under the [FLSA’s] broad definitions.” The end result of the Uber saga may shape the future of employer-employee relationships, and signal the boom or bust of the “on-demand economy.”
Which is good, as the rise of the “gig economy” continues, largely aided by a tough job market. Though there are decades of protections in place for employees and independent contractors alike, U.S. legislators seem to be making sure there’s some protection for those that straddle the line, not just letting the sharing economy off with just a monetary slap on the wrist. Which is good, since these on-demand apps tend to be turning quite a profit in the meantime.
In the case of Lyft v. Cutter, Lyft and the plaintiffs now have until May to negotiate a new settlement agreement, with a new date for the class period end. It’s something that would be in Lyft’s favor, since then they’d avoid the chance that a jury would find that the drivers have indeed been misclassified as independent contractors. Though they won’t settle the employment vs. independent contractor debate with this one, hopefully their drivers can get an actual fair shake.