Juries to Decide Whether Uber, Lyft Drivers Are Employees, With Implications for the Greater On-Demand Economy

March 27, 2015

The question of whether drivers for the burgeoning car service start-ups Uber and Lyft are employees or independent contractors will go before juries, two District Court judges in San Francisco have decided.  The outcome will not only impact the legal and financial obligations of the two tech giants to their drivers, but could have profound consequences for the booming on-demand economy, which has generated new income streams in industries as diverse as house cleaning, grocery delivery and legal services while utilizing app-based platforms to afford workers flexible scheduling.  Specifically, a finding that the drivers are employees will make Uber and Lyft subject to providing all of the benefits and protections owed to employees under California and federal law, including minimum wage rates, overtime compensation, unemployment benefits, and expense reimbursement.  The Uber and Lyft drivers have argued that the companies' ability to hire and fire them based on adherence to rules governing their conduct with customers, as well as requirements that drivers accept a certain percentage of rides and pass background checks, all demonstrate an employer-employee relationship.  The companies have maintained that the drivers, hired as contractors, retain significant control over their operations, including their own schedules, where they operate, and their equipment, including cars, which the drivers supply themselves.  According to the judge in the Uber case, a jury must decide the drivers' employment status because the issue "presents a mixed question of law and fact."  The Lyft judge acknowledged the difficulty the jury in that case will face, noting that the common law classification test California uses "isn't very helpful in addressing this 21st Century problem."  The option to settle the cases prior to a jury decision remains available, but out-of-court resolution appears unlikely.