Can somebody explain the basis for the Lyft lawsuit?

I understand the claim that the drivers would have made more had they been employees, but they weren’t employees and presumably made an agreement with Lyft that they would not be right?

So how can they make this claim?

Can I sue my employer that I would have made more money if they had me classified as a higher tier employee?

Can I sue the lottery corporation because I would have been richer had they picked my numbers? (kidding)

I don’t use Uber or Lyft and so I have no real feeling towards them vis a vis taxis or whatever. I’m just curious and the legalities here.

The law prevails no matter if the parties made a different agreement. The Lyft lawsuit is somewhat comparable to Fedex lawsuit:

From the linked article:
Lyft and larger rival Uber face legal actions from drivers who contend they should be classified as employees and therefore entitled to reimbursement for expenses, including gas and vehicle maintenance. Drivers currently pay those costs themselves.*
The point of the lawsuit is that the drivers are saying that they should have been classified as employees rather than independent contractors. Classification depends on a number of factors, and the word used by the company is not necessarily controlling, hence the lawsuit.

While I don’t know much about this specific lawsuit, in general the laws and regulations about who is an employee versus who is an independent contractor are pretty fixed, and an agreement in violation of the law is unenforceable. Further, the courts generally take a dim view when one party to an agreement wrote an “unconscionable” agreement AND had the most power in the relationship (it’s not like a potential driver had the ability to negotiate to be an employee instead–the whole business model revolved around independent contractors and a “take it or leave it” contract).

If an employer misclassified you as a lower-tier employee in violation of their own published rules or standards, you may have a claim against them, particularly if you can show they did so for discriminatory or retaliatory reasons; if you merely decide after the fact that you weren’t paid enough, you’re most likely out of luck (the exception being if you were not paid in conformance with the law: failure to follow the minimum-wage laws, e.g., would be a valid claim even if you had agreed).

You could sue the lottery corporation if their failure to pick your numbers was due to their failure to follow the laws governing them, but there is no right to have them pick any particular number, whereas there is a right to be classified as an employee if you meet the legal definition of employee.

Thanks for the answers. It is quite clear to me now.

One critical part of the complaint will be that “They are told what to do …” whereas a real contractor is given a task and does it.

For drivers, this means that the company tells them the route and timing … The drivers complain that they were told to do things expensive in terms of fuel and maintenance of the vehicle, but faster to save the company paying for hours…

The logic of the complaint is that the driver is forced to work for lower than the contract says, that the drivers were unable to predict the costs involved , and anyway the contract should ensure the contractor has a good chance to make reasonable income , eg comparable to what an employee would.

“Lyft and larger rival Uber face legal actions from drivers who contend they should be classified as employees and therefore entitled to reimbursement for expenses, including gas and vehicle maintenance. Drivers currently pay those costs themselves.”

If they win the lawsuit they can get back payment for those expenses. However, going forward, it is not at all clear they will make more money: Lyft will change it’s reimbursements. So while now the driver gets 70% to 80% of the fare, in the future the driver might get the gas and vehicle reimbursement plus 50% of the fare.

As a related aside, I used to work at a company called Science Applications International Corporation (SAIC), which is a huge employer here in San Diego. Back in the late 1990s, all new ‘employees’ were brought on as ‘consulting employees’ which was code for ‘independent contractors’ so the company didn’t have to cover benefits, but they paid you a lot better as a result. In my case, my wife covered our benefits so I was happy to let this happen.

Then word came down that Microsoft got in trouble for doing this practice. The real employees and contract employees were performing the same job duties, and the contract employees, in both cases, were asked to sign on with a clause that said they would agree to only work for SAIC, while employed, which is apparently not allowed with independent contractor.

A few days later, HR came and spoke to each contract employee telling them they could either be laid off or take a $30,000 pay cut to cover the cost of benefits they were now required to offer, which applied even if you didn’t opt to take them. Obviously, I agreed (temporarily) and then immediately started looking for another job and was out of there within a month.

I understand the various motivations - mostly by taxi companies and their lobbyists - to classify Lyft and Uber drivers as employees. But, to me at least, they are pretty clearly independent contractors. One of the main determinants is who decides when and how many hours a person will work. Uber and Lyft might institute certain procedures and structures, but it’s up to each driver to decide when and how much to work, and they do so without supervision. And, yes, this is different from a taxi driver who works an 8-hour shift, and has to communicate back and forth with a dispatcher, who controls the driver’s workload. I’m not intimately familiar with the process, but it seems to me that a Lyft or Uber driver can simply work as little or as much as he wants, on a continual basis.

For federal labor/employment law purposes, the factors that distinguish employees from independent contractors are: (1) the nexus between the services and the principal’s business; (2) permanency; (3) the amount of the worker’s investment in facilities and equipment; (4) the nature and degree of control by the principal; (5) opportunities for profit and loss; and, (6) the level of skill or initiative required.

An agreement to work exclusively for the principal equates to both a degree or permanency and a high degree of control by the principal. A true independent contractor is generally free to accept or reject assignments at his discretion.

Uber/Lyft drivers are kind of a weird case. From one perspective, the nexus between the service they provide and the principal’s business is almost 100%; Lyft is basically in the business of providing transportation by automobile. However, Uber and Lyft say their business is simply matching passengers with drivers.

There is no real permanency in a Lyft contract, and drivers are free to work for other ridesharing services.

Lyft drivers have a substantial investment in equipment; after all, they own the cars and presumably own a smartphone, which is all the equipment involved.

Where is largely falls down is in the control factor. Lyft doesn’t tell you what route to take, how to dress, where to wait for fares or anything like that. They just make sure your car is basically roadworthy and clean. The drivers have a clear opportunity to profit, and an equally clear opportunity to lose money. Obviously that’s not something that happens to an hourly or salaried employee.

I leave the skill/initiative question up to the reader.

Interesting information Really Not All That Bright, thanks for all of that.

True, but that is just part of it. To be classified as an independent contractor you have to be ALL of A B and C. When and how many hours is just one component. Independence on how the work is to be completed is another component.

What I don’t understand about this suit is that as independent contractors they are able to deduct mileage, fuel and depreciation on their vehicle. Isn’t that a generally better deal than some degree of partial reimbursement from Lyft?

I’m an independent contractor myself and those schedule C deductions are a huge relief to me. It’s more paperwork, sure, but it’s well worth it. Is this generally less of a factor in businesses with less capital expenditures?

A deduction is useless to many (most?) taxpayers, since the standard deduction is generally worth more than itemized deductions unless you’re a homeowner.

see message below

The Lyft (or Uber) driver has no control over the rates they can charge the rider. Lyft/Uber set the price and the rake.

That’s a good point.

Yes but can’t you take your costs as expenses on your schedule C?

Oh, yeah, duh. Though deducting 57 cents a mile still isn’t going to be as helpful as being reimbursed for 57 cents per mile.

I suppose you’re right, at least vis a vis most folks working as independent contractors as a sideline. I purchase tons of new equipment and software on a regular basis, so it’s a major factor in my tax situation.