Lyft Settles California Overtime Lawsuit

Sacramento, CALyft has agreed to settle the proposed class-action California overtime lawsuit filed by thousands of the company’s drivers, who alleged they were misclassified as independent contractors instead of employees. The settlement leaves Uber, another ride-sharing company, to face its own lawsuit filed by drivers who claim they should be considered employees and are entitled to rights and benefits including overtime pay and sick days.

The New York Times (1/27/16) reports that Lyft agreed to settle the lawsuit, including paying $12.25 million to affected drivers. The proposed settlement will also see the driver terms and conditions agreement changed to more accurately reflect the independent contractor designation. Drivers had filed the lawsuit seeking to be recognized as employees.

The line between independent contractor and employee has become more blurred with the rise of the sharing economy. Employees have more rights and benefits - including overtime pay and sick days - but are subject to more control by the employer. Independent contractors have more discretion in their job duties - such as setting their rate of pay and their hours - but as a result have fewer benefits. Independent contractors are also required to pay their own expenses, including vehicle maintenance and gas bills. Problems arise when companies hire independent contractors to avoid paying proper benefits but then expect to control the contractor’s job duties.

According to lawsuits filed against Lyft and Uber, the companies wielded a high level of control over their drivers, making the drivers less like independent contractors and more like employees. In addition to the settlement, Lyft has reportedly said it will consider “portable benefits” for drivers, but has not yet said what those benefits will be.

Both Uber and Lyft had arbitration clauses in their driver agreements requiring drivers to bring any claims against the companies through an arbitration process, which can be expensive and prevents a class action from being filed. In the Uber lawsuit, a judge found the arbitration clause to be unenforceable because it was defective, but such a ruling hadn’t been issued in the Lyft lawsuit. As part of the settlement, Lyft agreed to pay for the arbitration fees.

Uber is appealing the judge’s ruling that its arbitration agreement is not enforceable, but so far one of its requests to put the lawsuit on hold during the appeal has been denied.

According to Bloomberg (1/27/16), the same plaintiffs’ attorney in the Lyft case also represents plaintiffs in the Uber case. Shannon Liss-Riordan reportedly told Bloomberg that drivers in the Uber lawsuit complained about Uber cutting fares without driver input and not paying them what they were owed.

The Lyft lawsuit is Cotter v. Lyft Inc., 13-cv-04065, US District Court, Northern District of California (San Francisco). The Uber case is O’Connor v. Uber Technologies Inc., 13-cv-03826 US District Court, Northern District of California (San Francisco).