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Uber and Lyft driver status battle in two Massachusetts courts

The business models of Uber Technologies Inc. and Lyft Inc. are in court in the US state of Massachusetts. One case involves the treatment of drivers as independent contractors, and another concerns whether a ballot measure confirming contractor status will be put before voters in November.

The attorney general's 2020 lawsuit against the multibillion-dollar companies asks a judge to declare that drivers are employees subject to Massachusetts wage laws, which are among the strictest in the country. That would require Uber and Lyft to pay drivers minimum wage and overtime and provide them with sick leave. The trial, which lasts several weeks, begins on May 13th.

“I don’t think Uber and Lyft can operate in Massachusetts if they have to employ all these people,” said Jeffrey Fritz, a partner at Fisher Phillips LLP, who represents employers. While Attorney General Andrea Campbell's (D) office may be “on the back” of Massachusetts' current strict worker classification test, industry-backed ballot initiatives aimed at solidifying drivers' status as independent contractors could Matter ultimately left to voters, Fritz said.

The lawsuit seeks to resolve the widely contentious question of how to classify this emerging group of app-based workers, as legal challenges remain surrounding California's similar 2020 ballot measure.

Meanwhile, the state Supreme Court will hear oral argument on May 6 to decide whether the ballot petitions should be allowed to go before voters in November, as their sponsors face allegations that the language would impact the petitions' impact on the workers are disguised.

The industry's voting initiatives would extend to both ride-sharing and delivery app drivers for companies like… DoorDash Inc. And GrubHub.

A separate proposed ballot measure, also before the court and supported by Service Employees International Union affiliate 32BJ, would allow rideshare drivers to collectively bargain over their pay, benefits and working conditions in state-administered negotiations, although they would not have the have the necessary employee status for bargaining rights under federal labor law.

Strong laws

Massachusetts uses a strict test to determine whether workers are independent contractors or employees. In the Bay State, workers are considered employees unless a company can demonstrate that the work is beyond its control, outside the typical course of business, and is being performed by a worker operating his or her own independent business or trade.

What's happening in Massachusetts could help nudge state and federal policymakers on the issue of worker classification. While rideshare and delivery app drivers receive significant attention in the gig worker policy debate, companies often classify workers in a range of industries, including healthcare, technology and trucking, as independent contractors.

“The Commonwealth’s labor classification standard is the most stringent in the country and remains the gold standard,” said Chrissy Lynch, state AFL-CIO president.

“There has been a big push by those who fight for workers and believe in workers' rights to try to extend these protections to other states,” said Shannon Liss-Riordan, a founding member of Lichten & Liss-Riordan PC, which introduced an initiative in 2013 a landmark worker classification case against Uber. “On the other hand, there has been a major push by Uber and other companies that have profited from misclassifying workers as independent contractors to make the laws less stringent.”

A U.S. Labor Department regulation passed in January would make it harder for companies to classify workers as contractors, but faces several legal challenges that could derail its enforcement.

In a few places, drivers have enforced minimum wages, benefits and protections. The industry has cited new Washington state laws and a New York state settlement as examples of compromise that other cities and states should follow. But the companies have vigorously resisted legislation that seeks to increase driver pay without certifying independent contractor status, particularly as Uber and Lyft have threatened to halt service in Minneapolis if a recently enacted wage mandate goes into effect should occur.

Business model turned upside down

Uber and Lyft plan to argue in court that their drivers do not provide a service to the companies, a threshold the attorney general must meet to trigger application of the “ABC test” for classification as employees. Instead, Uber and Lyft claim that they have a “business-to-business relationship” with their drivers, who are beyond their control, provide services outside of their business, and engage in independent commerce.

“Drivers have consistently said they want the flexibility of independent working. The Attorney General is attempting to replace driver freedom with a rigid employment model that would harm drivers and consumers alike,” Theane Evangelis, a partner at Gibson, Dunn & Crutcher LLP who represents Uber, said in a statement.

Lyft told the court that a party for the attorney general would “upend Lyft's business model, disrupting the contracts with the thousands of drivers who use Lyft's platform and thereby disrupting the flexibility of the drivers and riders who rely on it.” “Leaving Lyft’s platform would put an end to service for affordable and convenient access to transportation.”

The attorney general wants to prove that “Uber and Lyft drivers are employees,” the complaint says. Campbell's office is also seeking damages it owes the drivers for the years they were wrongfully treated as independent contractors.

The rideshare companies also would have paid an estimated $266 million into state workers' compensation, unemployment insurance, and paid family and medical leave funds over the past decade if they had classified their drivers as employees, the state comptroller's office said in a statement April with 26 report.

Election campaign

The Supreme Court will review the attorney general's certification of the ballot initiatives as voters and a rideshare driver claim they fail to provide voters with the context that they would repeal worker protections. Justices blocked an industry-backed proposal in 2022 on the grounds that it improperly conflated two different policy decisions into a single issue.

The industry-backed Massachusetts Coalition for Independent Work has put forward nine ballot proposals for 2024, with the goal of ensuring at least one survives judicial review.

Of the five remaining industry proposals being challenged, two ensure that Massachusetts drivers remain independent contractors and three affirm contractor status while expanding various employee benefits, said Conor Yunits, spokesman for the coalition.

While Uber and Lyft are “having an uphill battle” under the state's current misclassification standard, “the public is really almost relying on their service at this point,” Fritz said. “I can’t imagine a properly tailored ballot initiative that doesn’t pass on this issue.”

The industry plans to bring only one proposal to the table on the November ballot, depending on how the court rules, Yunits said. If voters approve a ballot measure that only addresses contractor status, lawmakers could later enact salary and benefits guarantees, he said, adding that “an independent contractor status plus benefits model” is the industry's goal for Massachusetts.

Voters could approve both an industry-backed ballot measure and the SEIU's proposal to allow collective bargaining. A state legislative committee that was considering passing the ballot measures rather than sending them to voters recommended on April 30 that state lawmakers not adopt them, in part because of the uncertainty of the pending court challenges.

Given the timing of the trial in the attorney general's lawsuit, a court could declare Uber and Lyft drivers employees just weeks before voters go to the polls, Pat Moore, an assistant state attorney general, said at a hearing on the state's legislative process in the state March.

If voters approved the industry's ballot measure, “it would limit the likely impact” of the court's ruling, he told lawmakers. But the AG's office would seek back pay, benefits and penalties for previous years of misclassification, he said, and “the numbers involved are quite high.”

Anna Harden

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