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Uber Drivers Say Lack of Sick Pay Shows Need for Employee Status

July 14, 2020, 7:14 PM

Uber Technologies Inc. shouldn’t be able to use arbitration agreements to avoid complying with a Massachusetts law that could give drivers access to paid sick leave during the Covid-19 pandemic, a group of Massachusetts drivers told the Ninth Circuit.

The drivers asked the U.S. Court of Appeals for the Ninth Circuit on Monday to reconsider an emergency measure that would force the company to classify them as employees, making them eligible for benefits such as paid sick leave, overtime, and minimum wage. Massachusetts is one of a handful of states using a three-part legal test that makes it difficult for companies, like Uber, to defend their reliance on independent contractors.

The coronavirus pandemic put the tension over the ride-hailing giant’s business model on full display in several pending misclassification disputes. Drivers for Uber, as well as Lyft Inc., asked courts for preliminary injunctions that would immediately classify them as employees. Both companies require drivers to sign arbitration agreements, which could keep disputes out of court.

In the Massachusetts drivers’ case against Uber, a federal judge denied the request and ruled that the drivers must arbitrate classification claims brought by their workers. The Ninth Circuit should reverse the lower court’s decision, the drivers’ attorney, Shannon Liss-Riordan, told the appeals court.

“Uber’s business model—and that of the ‘gig economy’ that it has ushered in—is premised on this misclassification,” Liss-Riordan said. “But now Covid-19 has toppled Uber’s house of cards and revealed the undeniable damage done by Uber’s degradation of labor standards, which impacts not only the drivers but the public at large as well.”

Liss-Riordan argued Judge Edward Chen of U.S. District Court for the Northern District of California was wrong to decide that Uber’s arbitration clause was enforceable because Uber drivers should be exempt from arbitration clauses as transportation workers under the Federal Arbitration Act.

Federal district courts have split on the question of whether gig economy and other drivers should fall under that exception in cases involving Lyft, Grubhub Inc., and Amazon.com Inc. The First, Seventh, and Ninth circuits are poised to decide the question. The Third Circuit is the only federal appeals court to have addressed the issue with respect to rideshare drivers, but it didn’t directly rule on whether Uber drivers fall under the exception.

New Litigation

Massachusetts adopted a three-part “ABC” test in 2004, long before debate raged in California over a new state law that codified the same standard. The test requires companies to prove three factors to classify a worker as an independent contractor, including showing that work is “performed outside the usual course of business.” That provision poses a challenge for gig companies—one they have largely evaded to date thanks to arbitration agreements.

In a separate action on Tuesday, the state of Massachusetts sued Uber and Lyft for allegedly misclassifying drivers and avoiding paying them minimum wage and overtime. The lawsuit mirrors one California’s attorney general filed against Uber. The government lawsuits aren’t blocked by arbitration agreements. Both suits come as the ride-hailing companies face revenue losses caused by the coronavirus pandemic.

“At a time when Massachusetts’ economy is in crisis with a record 16% unemployment rate, we need to make it easier, not harder, for people to quickly start earning an income,” Uber said in a statement responding to the state litigation. “We will contest this action in court, as it flies in the face of what the vast majority of drivers want: to work independently. We stand ready to work with the state to modernize our laws, so that independent workers receive new protections while maintaining the flexibility they prefer.”

Lichten & Liss-Riordan represents the drivers. Gibson, Dunn & Crutcher represents Uber in the Ninth Circuit case. Neither the company nor its attorneys responded to requests for comment on the appeal.

The case is Capriole v. Uber Technologies, Inc., 9th Cir., 20-16030, opening brief filed 7/13/20.

To contact the reporter on this story: Erin Mulvaney in Washington at emulvaney@bloomberglaw.com

To contact the editors responsible for this story: Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; John Lauinger at jlauinger@bloomberglaw.com

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