Not a Member? Get access to HR news and resources that you can trust.
Here is how HR can help prevent the missteps that could cost your company big in court.
Is your employee handbook ready for the changing world of work? With SHRM’s Employee Handbook Builder get peace of mind that your handbook is up-to-date.
60+ new SHRM Seminar dates in 10 U.S. cities and virtually.
Expand your influence and learn how to become an effective leader -- Join us in Phoenix, AZ, October 2-4, 2017.
In two cases stretching the boundaries of what it means to be an employee, juries will decide whether Uber and Lyft drivers are employees or independent contractors. The U.S. District Court for the Northern District of California rejected both companies’ motions for summary judgment on March 11, 2015, in two different cases.
The plaintiffs in O’Connor v. Uber Technologies, No. C-13-3826, maintained they were Uber employees entitled to the protections of the California Labor Code, such as the requirement that an employer pass on the entire amount of any gratuity that is paid, given to or left for an employee by a patron. Pointing to contracts signed by drivers that state the relationship between the drivers and Uber is “solely that of independent contracting parties,” Uber argued the drivers were independent contractors as a matter of law.
Many employers assume that if they have contracts designating workers as independent contractors that is enough, but Uber shows that may not be enough to prevail on a summary judgment motion, noted Tamara Devitt, an attorney with Haynes and Boone in Orange County, Calif.
The plaintiffs in Cotter v. Lyft, No. 13-cv-04065, similarly maintained that they were Lyft employees entitled to the California Labor Code’s minimum wage protections and right to reimbursement for expenses. Noting that Lyft drivers enjoy great flexibility in when and how often to work, Lyft argued they were independent contractors. “The answer is of great consequence for the drivers, because the California legislature has conferred many protections on employees, while independent contractors receive virtually none,” the court stated. “The answer is also of great import to Lyft, because its business model assumes the drivers are independent contractors.”
Under California law, once a plaintiff shows he or she provided services for an employer, a prima facie case that the relationship was one of employer/employee has been established, Judge Edward Chen said in the Uber case. The burden then shifts to the company to prove, if it can, that the presumed employee was an independent contractor.
The most significant consideration in whether a worker is an employee is the company’s right to control work details.
The California Supreme Court has further held that the main consideration is “not how much control a hirer exercises, but how much control the hirer retains the right to exercise” (emphasis in original). And an employer’s right to discharge at will without cause is strong evidence in support of an employment relationship.
The district court ruled that the drivers provide a service to Uber, rejecting its argument that it is not a transportation company, but a pure technology company that generates leads for its transportation providers through its software. “It is obvious drivers perform a service for Uber because Uber simply would not be a viable business entity without its drivers,” the court stated.
Uber argued that the right-to-control element is not met because drivers can work as much or as little as they like, as long as they give at least one ride every 180 days if on the uberX platform or every 30 days if on the UberBlack platform. Uber added that drivers never have to accept any leads generated by Uber—they can turn down as many rides as they want without penalty. And they can control how to give any rides they accept.
However, the court noted, “These contentions are very much in dispute. For instance, while Uber argues that drivers never actually have to accept ride requests when logged in to the Uber application, plaintiffs [are] provided an Uber Driver Handbook that expressly states: ‘We expect on-duty drivers to accept all ride requests.’ … The handbook goes on to state that ‘we consider a dispatch that is not accepted to be a rejection,’ and we ‘will follow up with all drivers that are rejecting trips.’ ”
The court added, “It is also hotly disputed whether Uber has the right to significantly control the ‘manner and means’ of plaintiffs’ transportation services. Plaintiffs cite numerous documents, written in the language of command, that instruct drivers to, amongst other things: ‘make sure you are dressed professionally’; send the client a text message when 1-2 minutes from the pickup location (‘This is VERY IMPORTANT’); ‘make sure the radio is off or on soft jazz or NPR’; and ‘make sure to open the door for your client.’ ”
The court observed that “To be sure, a number of secondary factors (e.g., drivers use their own vehicle, may employ other drivers to drive on their behalf and signed an agreement stating no employment relationship is created) do support an independent contractor classification.” But ultimately whether an employment relationship has been established is best for a jury to resolve, Chen concluded.
In a separate decision and litigation, Judge Vince Chhabria also ruled that a jury should decide whether Lyft drivers are employees or independent contractors under California law.
The plaintiffs alleged that Lyft owes them money because it should have paid them as employees rather than independent contractors. “For example, they argue that, under California law, Lyft should have reimbursed them for expenses, and that, at least sometimes, Lyft failed to pay them minimum wage.”
Chhabria observed that “Under California law, the question of how to classify a worker is typically for a jury.” And he added, “Here, because the numerous factors for deciding whether a worker is an employee or an independent contractor point in decidedly different directions, a reasonable jury could go either way. Accordingly, there must be a trial.”
The court said, “Given California’s ‘multifaceted test’ for employee status, and given the presumption in favor of employee status under California law, establishing independent contractor status as a matter of law presents a particularly difficult hurdle.”
Lyft controls too many aspects of the drivers’ job to win a summary judgment motion on its assertion that the drivers are independent contractors. The court noted that “Although Lyft drivers enjoy great flexibility in when and how often to work, once they do accept ride requests, Lyft retains a good deal of control over how they proceed. Lyft instructed the plaintiffs (in the ‘Rules of the Road’ section of the driver guide and later in the FAQs on its website) not to do a number of things—not to talk on the phone with a passenger present, not to pick up nonLyft passengers, not to have anyone else in the car, not to request tips, not to smoke or to allow the car to smell like smoke, and not to ask for a passenger’s contact information. Lyft also affirmatively instructed the plaintiffs to do a number of things—to wash and vacuum the car once a week, to greet passengers with a smile and a fist-bump, to ask passengers what type of music they’d like to hear, to offer passengers a cellphone charge, and to use the route given by a GPS navigation system if the passenger does not have a preference.”
Chhabria concluded, “The test the California courts have developed over the 20th century for classifying workers isn’t very helpful in addressing the 21st century problem. Some factors point in one direction, some point in the other and some are ambiguous. Perhaps 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 worker altogether, requiring a different set of protections. But absent legislative intervention, California’s outmoded test for classifying workers will apply in cases like this. And because the test provides nothing remotely close to a clear answer, it will often be for juries to decide.”
Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.
Classification of Sharing Economy Workers as Contractors Challenged, SHRM Online, February 2015
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Don’t Lose Sight! What Does Poor Preventive Care Cost Your Business?
Become a SHRM Member
SHRM’s HR Vendor Directory contains over 3,200 companies