Here’s how the state’s lawsuit against Uber and Lyft could impact rideshares

Business

While the question of whether rideshare drivers are independent contractors or employees is the subject of litigation, many are wondering whether both companies will continue to operate in the state.

The question of whether a rideshare company’s drivers are independent contractors or employees is at the heart of a court case, which is being heard before a Suffolk Superior Court judge. The consequences of whether or not rideshare workers are classified as employees could upend the industry, changing the way customers interact with companies in the future.

The state attorney general’s office says classifying drivers as employees will entitle them to minimum wage and overtime, reimbursement for business expenses such as fuel and car maintenance, and adequate paid sick leave.

Lawyers for Uber and Lyft say updating employment status would lead to higher prices, reduced service areas, longer wait times and possibly the companies’ complete cessation of operations in the area. ‘State.

According to a state report, rideshare companies provided 91.1 million rides in the state in 2019 and collected more than $18.2 million in taxes during the same year.

The trial is expected to last nearly a month.

What the Attorney General’s Office Says

In the summer of 2020, Maura Healey, then attorney general and now governor, filed a lawsuit against Uber and Lyft for misclassifying their drivers as independent contractors rather than employees.

“Uber and Lyft built their billion-dollar businesses while denying their drivers basic protections and benefits for years,” Healey said in a statement at the time. “This economic model is unfair and exploitative. »

The attorney general’s office says Uber and Lyft cannot meet a three-part test under state law, dubbed the “ABC test.” Under the test, an independent contractor is a worker free from direction and control who performs tasks outside the usual course of business and is engaged in an independent business.

Although rideshare companies say drivers set their own schedules, the attorney general says they are closely monitored through their apps and that the companies offer incentives to get drivers to work schedules that benefit the company . Companies also penalize drivers who don’t accept enough rides, cancel too many rides, and don’t maintain customer satisfaction ratings. Additionally, rideshare companies benefit from cost-sharing agreements.

As independent contractors, drivers are not entitled to state minimum wage, overtime pay, or reimbursement for necessary business expenses. Although companies have offered drivers temporary paid leave for the COVID-19 pandemic, these policies do not comply with the Massachusetts earned sick leave law.

The complaint argues that drivers will gain these rights and more by becoming classified as employees.

Drivers are not the only ones who can benefit from employee status. State Auditor Diana DiZoglio released a report earlier this month showing how ride-hailing apps like Uber and Lyft may have contributed $266.4 million over the past decade to employee protection programs.

However, the attorney general’s office has not commented on how the change in employment status might affect consumers.

What Uber and Lyft say

Lawyers representing Uber and Lyft say reclassifying drivers as employees would raise questions about the companies’ continued existence in the state.

Inefficiencies caused by an employment model, such as fixed schedules, would increase costs, reduce the number of available drivers, reduce service areas and increase rider wait times.

“If the Attorney General wins this case, millions of Massachusetts riders would experience severe service reductions and pay significantly higher costs, while tens of thousands of drivers would lose access to flexible work,” said Theane Evangelis , Uber’s lawyer, in a sent statement. on Boston.com.

Evangelis argues that the attorney general is forcing jobs on drivers, even though the vast majority say they don’t want them.

Evangelis pointed to a study by Beacon Economics, which found that reclassifying Massachusetts rideshare and delivery drivers as employees would result in the loss of at least 58% of these jobs in the Commonwealth and could result in the loss of up to 87% of jobs. all rideshare and delivery jobs in the state.

If the decision favors the attorney general, Uber would need time to adjust, which would require at least a temporary shutdown of the platform.

What is happening elsewhere in the country

So far, ride-hailing platforms have gotten around the dilemma elsewhere in the country by funding ballot initiatives and regulations.

In California, lawmakers reclassified many self-employed workers as employees in 2019. Following a campaign by Uber and Lyft in 2020, voters passed Proposition 22, a ballot measure that allows ride-hailing platforms to classify their workers as independent contractors rather than employees. However, the debate over the ballot initiative remains in court.

According to the New York Attorney General’s Office, Uber and Lyft reached a $328 million settlement with the office last year to resolve allegations that they cheated workers out of wages. As part of the deal, drivers in the state also received mandatory paid sick leave, minimum wage and other benefits.

In 2022, Uber and Rasier (a subsidiary of Uber) contributed $100 million to the New Jersey Department of Labor and Workforce Development’s unemployment trust fund after an audit found that Rideshare companies had wrongly classified hundreds of thousands of drivers as independent contractors, thereby depriving them of safety net benefits. This is the largest payment the state has ever received, covering 297,866 drivers.

The court’s decision will not end the debate

Uber, Lyft, DoorDash and Instacart are funding an industry-backed ballot question committee called Flexibility and Benefits for Massachusetts Drivers, which will support state ballot measures that would keep app-based drivers as employees. independent contractors in the November elections.

The ballot initiative, as described on the organization’s website, would also establish a wage floor equal to 120% of the state’s minimum wage, or $18 an hour in 2023 before tips. Drivers would also receive health care benefits, workers’ compensation insurance and paid sick leave.

A Beacon Research survey, funded by Flexibility and Benefits for Massachusetts Drivers, found that 85 percent of drivers believe passing a law to protect their status as independent contractors would be a change for the better.

Through a ballot initiative, Evangelis, Uber’s lawyer, says ride-sharing companies should offer drivers benefits and protections, such as earnings protections and sick pay.

“Uber is ready now in Massachusetts and across the country to support new laws to make this happen,” Evangelis added.