Uber and Lyft Lawsuit Is Like ‘Square Peg and Two Round Holes,’ Says Judge

March 12, 2015 Updated: March 15, 2015

Lawsuits against ride-app services Uber and Lyft will be determined by juries, according to two separate rulings in San Francisco on Wednesday. The courts denied the companies’ motions for dismissal.

The two companies are being sued by their drivers for misclassifying drivers as independent contractors and skipping out on paying employee benefits and insurance.

Both U.S. District Judges Edward Chen and Vince Chhabria, ruling on Uber and Lyft cases respectively, found the distinction difficult.

In some ways Uber and Lyft drivers are like independent contractors, according to the court rulings. Independent contractors work under specific terms of a contract or verbal agreement, but are not held to a particular time schedule. The companies’ main argument was that drivers have flexible hours.

There is also the fact that Uber drivers receive instructions to play soft jazz on the radio station NPR in their cars and Lyft drivers are not allowed to smoke in their cars. The wording of such orders are not phrased like the suggestions the companies have claimed they are, said both Chen and Chhabria in their rulings.

The judges found it hard to fit Uber and Lyft drivers into either the definition of an independent contractor or the definition of an employee.

The juries in these cases would be dealing with “a square peg and asked to choose between two round holes,” wrote Chhabria.

What further convinced the judges not to dismiss the cases was that the companies’ arguments fell flat.

Uber argued that it wasn’t a transportation company but in fact a technology company.

Uber does not simply sell software; it sells rides.
— Edward Chen, U.S. district judge

The lawyer for the drivers in both cases, Shannon Liss-Riordan, called it “a whole new spate of companies who seem to think they can get away with a trick by calling themselves technology companies.”

Chen, the judge in the Uber case, agreed with Liss-Riordan, ruling that going by Uber’s definition, any company that used technology could be considered a tech company.

Uber also argued that the drivers did not provide Uber a service, which is a key part of the legal definition of an employee. Lyft took a similar tone in its defense, painting itself as a “disinterested third party,” in Chhabria’s words.

Both judges found this argument uncompelling.

Chen found that without drivers, Uber could not run as a company, so obviously a service was being provided.

“It strains credulity,” Chen stated in the ruling. 

He wrote, “Uber does not simply sell software; it sells rides.”

Other factors that pointed more toward the definition of employee: Uber and Lyft conduct thorough background checks on their drivers; the companies can terminate drivers at any time; and drivers share a percentage of their profits with the companies rather than flat rate fees.

If Uber and Lyft drivers are redefined as employees, they could be eligible for unemployment benefits, workers’ compensation, mileage reimbursement, and car maintenance.

Currently, the cases will only affect those in California. If the drivers were classified as employees, the companies would have to obey California wage laws, which are stricter than in many other states.

Liss-Riordan plans to appeal the courts’ rulings limiting the outcome of the cases to the state of California only—seeking to have the cases apply to drivers nationwide, which could mean more benefits and workers’ rights across the country.

Uber also has a clause in its drivers’ contracts requiring arbitration in lieu of filing lawsuits, which the company could make use of soon, said Liss-Riordan.

In the meantime, Liss-Riordan’s firm is being contacted by drivers across the country in preparation for filing individual arbitration cases in case Uber asserts its arbitration clause.

That’s “the next battle that I’m expecting in the Uber case,” said Liss-Riordan.

Correction: A previous version of this article incorrectly stated future lawsuit plans for Uber drivers across the country. The Epoch Times regrets the error.