Business
As the issue of whether ride-share drivers are independent contractors or employees goes to trial, many question whether the two companies will remain operating in the state.
Whether ride-share company drivers are independent contractors or employees is at the core of a case in court, which is in trial before a judge at Suffolk Superior Court. The ramifications of whether or not ride-share workers are classified as employees could upend the industry, changing the way customers interact with the companies in the future.
The state Attorney General’s Office argues that classifying drivers as employees will entitle them to minimum wage and overtime, reimbursements for business expenses such as fuel and car maintenance, and adequate paid sick leave.
Uber and Lyft lawyers argue that updating the employment status would lead to higher prices, reduced service areas, longer wait times, and possibly the end of the companies’ operations in the state altogether.
According to a state report, ride-share companies provided 91.1 million rides in the state in 2019 and collected more than $18.2 million in taxes within the same year.
The trial is expected to last nearly a month.
What the Attorney General’s Office is arguing
In the summer of 2020, then Attorney General and now Gov. Maura Healey filed a suit that Uber and Lyft misclassified their drivers as independent contractors rather than employees.
“Uber and Lyft have built their billion-dollar businesses while denying their drivers basic employee protections and benefits for years,” Healey said in a statement at the time. “This business model is unfair and exploitative.”
The Attorney General’s Office argues that 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 duties outside the usual course of the business and is engaged in an independent company.
Although ride-share companies say that drivers set their own schedules, the attorney general argues that they are closely monitored through their apps and the companies offer incentives to induce drivers to work shifts that benefit the business. The companies also penalize drivers for not accepting enough rides, canceling too many rides, and not maintaining customer satisfaction ratings. In addition, the ride-share companies benefit from the fee-splitting arrangements.
As independent contractors, drivers are not entitled to the state minimum wage, overtime, or necessary business expense reimbursements. Even though the companies have offered drivers temporary paid leave for the COVID-19 pandemic, those policies fail to meet the Massachusetts Earned Sick Time Law.
The complaint argues that the drivers will earn these rights and more by becoming classified as employees.
Drivers aren’t the only ones who could benefit from employee status. State Auditor Diana DiZoglio released a report earlier this month showing how ride-share apps like Uber and Lyft could 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 could affect consumers.
What Uber & Lyft are saying
Lawyers representing Uber and Lyft argue that reclassifying drivers as employees would raise questions about the companies’ continued existence in the state.
The inefficiencies caused by an employment model, such as fixed shifts, would drive costs up, lower the number of drivers available, reduce service areas, and increase riders’ wait times.
“If the Attorney General wins this case, millions of Massachusetts riders would suffer severe service reductions and pay significantly higher costs, while tens of thousands of drivers would lose access to flexible work,” Theane Evangelis, the Uber lawyer, said in a statement sent to Boston.com.
Evangelis argues that the attorney general is forcing employment on drivers, even when the vast majority say they don’t want it.
Evangelis pointed to a study from Beacon Economics, which found that reclassifying Massachusetts ride-share 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 all ride-share and delivery jobs in the state.
If the ruling favors the attorney general, Uber would need time to adapt, requiring at least a temporary platform shutdown.
What is happening elsewhere in the country
So far, the ride-share platforms have circumvented the dilemma elsewhere in the country by funding ballot initiatives and settlements.
In California, lawmakers reclassified many independent workers as employees in 2019. Following a campaign by Uber and Lyft in 2020, voters passed Proposition 22, a ballot measure that allows ride-share platforms to classify their workers as independent contractors rather than employees. However, the debate over the ballot initiative remains in court.
According to New York’s Attorney General’s Office, Uber and Lyft struck a $328 million deal with the office last year to resolve claims they cheated workers out of pay. 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) paid $100 million to the New Jersey Department of Labor and Workforce Development’s Unemployment Trust Fund after an audit found the ride-share companies improperly classified hundreds of thousands of drivers as independent contractors, depriving them of safety-net benefits. It was the state’s most significant payment ever received, covering 297,866 drivers.
The court ruling will not be the end of 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 independent contractors at this November’s election.
The ballot initiative, as outlined on the organization’s website, would also establish an earning floor equal to 120% of the state’s minimum wage, or $18 an hour in 2023 before tips. Drivers would also receive health care stipends, occupational accident insurance, and paid sick time.
A Beacon Research survey, paid for by Flexibility and Benefits for Massachusetts Drivers, found that 85% of drivers believe passing a law to protect their status as independent contractors would be a change for the better.
Through a ballot initiative, Uber’s lawyer Evangelis says ride-share companies should provide driver benefits and protections, such as earning protections and sick pay.
“Uber is ready right now in Massachusetts and throughout the country to support new laws to make that happen,” Evangelis added.
Newsletter Signup
Stay up to date on all the latest news from Boston.com
#Heres #states #Uber #Lyft #suit #impact #ride #shares