March 11 was a tough day for ride-sharing start-ups Uber and Lyft as federal court judges in the U.S. District Court for the Northern District of California issued separate decisions in class action lawsuits brought by drivers from both companies. Those drivers allege that Uber and Lyft misclassified them as independent contractors (ICs) instead of employees — thereby depriving the drivers of many employee benefits. Both Uber and Lyft had filed motions with the court seeking summary judgment on the grounds that they had properly classified the drivers as ICs. The courts in both cases denied the motions and ruled that juries would have to decide whether the drivers are employees or ICs. O’Connor v. Uber Technologies, Inc., No. 3:13-cv-03826-EMC (N.D. Cal. Mar. 11, 2015); Cotter v. Lyft, Inc., No. 3:13-cv-04065-VC (N.D. Cal. Mar. 11, 2015).
These cases will likely have far-reaching implications for Uber, Lyft and other companies in the “on demand” economy. Companies that use a 1099 business model or that have failed to properly structure, document and implement their IC relationships in a manner that complies with applicable laws should take affirmative steps to avoid being the next Uber or Lyft in an IC misclassification lawsuit.
The ONLY real way to prevent this is by consulting with an attorney who is not only experienced with labor and employee misclassification lawsuit, but one that is experienced in the For-Hire Vehicle industry.