SAN FRANCISCO (Legal Newsline) – In May thousands of drivers lost their jobs when Uber
Technologies Inc. and Lyft Inc. removed their services from Austin, Texas.
In June, two of those drivers, Uber’s Todd Johnston and Lyft’s David Thornton filed
two proposed class action suits in California. The companies moved out of
Austin following new regulations.
“The success of the suit depends on a
common issue that Uber and Lyft have been litigating in many different forums:
whether their drivers are employees or independent contractors,” attorney
Jennifer McLaughlin told Legal Newsline.
The lawsuit was brought under the Worker
Adjustment and Retraining Notification Act (WARN). The statute stated that
employers who have 100 or more “employees” who work on average more than 20
hours a week are entitled to 60 days notice prior to a plant closing or mass
McLaughlin said the goal of the
legislation was to ensure that workers were able to find alternative
employment, arrange for retraining, and make accommodations for the loss of
The plaintiffs argue that Uber and Lyft effectively laid off their 10,000 drivers who were
contracted to operate in the city. The language of the statute called for
notification if a layoff impacts more than 500 workers.
McLaughlin, a commercial litigator with Cullen
and Dykman LLP in New York, said the plaintiffs face a significant hurdle.
the statute to apply, those laid off must have been employees,” McLaughlin
said. “Uber and Lyft, however, have consistently held their drivers out to be
independent contractors, who are entitled to significantly different benefits
and rights than employees.”
McLaughlin cited an unrelated lawsuit in April when Uber reached a settlement with drivers in Massachusetts and
California, the terms of which dictate that they are to be considered
independent contractors, not employees.
“There hasn’t been a definitive court
ruling on this issue so far. It will be an uphill battle for the plaintiffs to
gain the status of employees in the eyes of the court,” McLaughlin said.
In another case, the New York Taxi Workers Alliance, on
behalf of Uber drivers in New York, filed a lawsuit last week accusing the
company of mis-classifying the drivers as independent contractors. If they
were recognized as employees, however, the drivers would be eligible to receive
a minimum wage, overtime pay, and reimbursements for certain business
expenses. Without such benefits, Uber and Lyft drivers are forced to pay
out of pocket for car payments, maintenance, and other charges.
The Austin lawsuits stem from a public referendum, known
as Proposition 1, which asked voters whether the city should require Uber and
Lyft to conduct fingerprint-based background checks on its drivers. Uber and
Lyft spent approximately $8 million on a campaign to fight the ordinance,
setting up a political action committee called Ridesharing Works for
The group argued that the background checks were
burdensome and inconsistent with its ride sharing business plan. After losing the referendum and considering the
restrictions imposed by the city at odds with their business plans, Uber and
Lyft ceased their services in Austin. Uber and Lyft publicly argued that the
city's requirements made hiring employees costly and difficult considering
their business plan.
Lyft spokesperson said in a public statement after the referendum was defeated "the rules passed by city council don't allow true ridesharing to
operate. Instead, they make it harder for part-time drivers ... to get on the
road and harder for passengers to get a ride."
“It’s possible that Uber and Lyft left
Austin because the city's ordinances were impliedly categorizing their drivers
as employees, not independent contractors,” McLaughlin said. “This could impact
the company's ongoing quest to ensure that its drivers are independent
contractors, keeping costs down and encouraging a freely transitioning body of