Uber, Lyft Driver Status Fight Set for Two Massachusetts Courts

The business models for Uber Technologies Inc. and Lyft Inc. face dueling tests in Massachusetts state courts, one case challenging drivers’ treatment as independent contractors and another determining whether a ballot measure to affirm that contractor status goes before voters in November.

The state attorney general’s 2020 lawsuit against the multibillion-dollar companies asks a judge to declare that drivers are employees subject to Massachusetts’s wage laws, which are some of the strictest in the country. That would require Uber and Lyft to pay drivers minimum wage and overtime, and offer sick leave. The multi-week trial begins May 13.

“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 have “wind at their back” under Massachusetts’s current strict worker classification test, industry-backed ballot initiatives seeking to cement drivers’ status as independent contractors could ultimately leave the issue up to voters, Fritz said.

The lawsuit seeks to resolve the widely disputed question of how this emerging contingent of app-based workers should be classified, with ongoing legal challenges still playing out over California’s similar 2020 ballot measure.

Meanwhile, the state Supreme Judicial Court will hear oral argument May 6 to decide whether the ballot petitions may be presented to voters in November, as their sponsors face accusations that the language obscures the petitions’ impact on workers.

The industry’s ballot initiatives would cover ride-share as well as delivery-app drivers for companies like DoorDash Inc. and GrubHub.

A separate proposed ballot measure also before the court, backed by the 32BJ affiliate of the Service Employees International Union, would let ride-share drivers collectively bargain on their pay, benefits, and working conditions via state-managed negotiations despite lacking the employee status needed for bargaining rights under federal labor law.

Strong Laws

Massachusetts utilizes a strict test for determining whether workers are independent contractors or employees. In the Bay State, workers are presumed to be employees unless a business can demonstrate that the work is free from its control, outside of the typical course of its business, and done by a worker who operates their own independent business or trade.

What happens in Massachusetts could help nudge state and federal policymakers on the issue of worker classification. While ride-share and delivery-app drivers get much of the attention in the gig worker policy debate, businesses commonly classify workers as independent contractors across a range of industries including health care, technology, and trucking.

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

“There’s been a big push, for those who fight for workers and believe in workers’ rights, to try to expand these protections to other states,” said Shannon Liss-Riordan, a founding member of Lichten & Liss-Riordan P.C. who brought a landmark worker classification case against Uber in 2013. “On the other side, there’s been a huge push by Uber and other companies that have profited off of misclassification of workers as independent contractors to make the laws less strong.”

A US Labor Department regulation finalized in January would make it harder for businesses to classify workers as contractors, but faces multiple legal challenges that could derail its enforcement.

Drivers have won minimum pay, benefits, and protections in a handful of places. The industry has held up new Washington state laws and a New York state settlement as models of compromise that other cities and states should follow. But the companies have pushed back hard against legislation that seeks to raise driver pay without affirming the independent contractor status, most notably with Uber and Lyft threatening to end service in Minneapolis if a recently enacted pay mandate takes effect.

Upended Business Model

Uber and Lyft plan to make the case at trial that their drivers do not perform a service for the companies, a threshold the attorney general must meet to trigger application of the “ABC test” for worker classification. Instead, Uber and Lyft claim they are in a “business-to-business relationship” with their drivers, who are free from their control, perform services outside of the course of their business, and engage in an independent trade.

“Drivers have said time and time again that they want the flexibility of independent work. The Attorney General is trying to replace drivers’ freedom with a rigid employment model that would harm drivers and consumers alike,” Theane Evangelis, a Gibson, Dunn & Crutcher LLP partner representing Uber, said in a statement.

Lyft told the court that siding with the attorney general would “upend Lyft’s business model, disrupt contracts with the thousands of drivers who use Lyft’s platform, and in the process put an end to the flexibility enjoyed by those drivers and the riders who rely on Lyft’s service for affordable and convenient access to transportation.”

The attorney general plans to demonstrate that “Uber and Lyft drivers are employees,” according to the complaint. Campbell’s office also wants damages she claims drivers are owed for the years they were wrongly treated as independent contractors.

The ride-share companies also would have paid an estimated $266 million over the last 10 years into the state worker’s compensation, unemployment insurance, and paid family and medical leave funds if they classified their drivers as employees, the state auditor’s office said in an April 26 report.

Ballot Battle

The Supreme Judicial Court is set to review the attorney general’s certification of the ballot initiatives, as voters and a ride-share driver claim they fail to provide voters with context that they would wipe away worker protections. The justices blocked an industry-backed proposal in 2022, finding that it improperly blended two distinct policy decisions into a single question.

The industry-backed alliance Massachusetts Coalition for Independent Work introduced nine related ballot proposals for 2024—attempting to guarantee at least one survives court scrutiny.

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

While Uber and Lyft “have a tough row to hoe” under the state’s current misclassification standard, “the public really almost relies on their service at this point,” Fritz said. “I can’t imagine a ballot initiative that’s reasonably tailored not passing on that issue.”

The industry plans to put only one proposal on the November ballot, depending how the court rules, Yunits said. If voters approve a contractor-status-only ballot measure, the legislature could enact pay and benefit guarantees later, he said, adding “an independent-contractor status plus benefits model” is the industry’s goal for Massachusetts.

Voters could pass both an industry-backed ballot measure and SEIU’s proposal to enable collective bargaining. A state legislative committee that considered enacting the ballot measures in lieu of sending them to voters recommended on April 30 that state lawmakers don’t adopt them, partly due to the uncertainty of the pending court challenges.

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

If voters approve the industry’s ballot measure, “that would have a limit on the prospective effect” of the court’s ruling, he told lawmakers. But the AG’s office would pursue back pay, benefits, and penalties for prior years of misclassification, he said, and “the numbers associated with those are quite large.”