Healey sues Uber, Lyft for misclassifying drivers

ATTORNEY GENERAL MAURA HEALEY on Tuesday filed a lawsuit against ride-hailing platforms Uber and Lyft accusing them of misclassifying drivers as independent contractors instead of employees.

“Uber and Lyft have gotten a free ride for far too long,” Healey said. “For years, they have systematically denied drivers basic workplace protections and benefits and profited greatly from it.”

Massachusetts is the second state to make this claim. California filed a similar lawsuit in May.

Healey said although ride-hailing companies have existed for years, the issue has gotten more urgent with the explosion in their popularity, and the coronavirus pandemic has called attention to the importance of benefits like paid sick time and unemployment insurance. “What the COVID pandemic has shown is just how many folks are employed in the gig economy who it turns out lack very basic protections and benefits,” Healey said.

Healey added that with federal and state decisions to pay unemployment benefits for independent workers during the pandemic, taxpayers and businesses who pay into the unemployment insurance system are paying for benefits for Uber and Lyft drivers. “They’re a business out there like any other business. All we’re asking is for them to play by the same rules,” Healey said.

Uber and Lyft both say the lawsuit threatens the jobs of drivers, many of whom prefer working independently.

“This lawsuit threatens to eliminate work for more than 50,000 people in Massachusetts at the worst possible time,” said CJ Macklin, a spokesperson for Lyft. “Drivers don’t want this — 89 percent of Massachusetts Lyft drivers drive fewer than 20 hours per week and choose to drive rideshare precisely because of the independence it gives them to make money in their spare time.”

Alix Anfang, a spokesperson for Uber, said, “At a time when Massachusetts’ economy is in crisis with a record 16 percent unemployment rate, we need to make it easier, not harder, for people to quickly start earning an income. We will contest this action in court, as it flies in the face of what the vast majority of drivers want: to work independently.”

Anfang said Uber is willing to work with state policymakers to provide new protections to drivers, while maintaining their independence and flexibility.

Massachusetts has around 200,000 Uber and Lyft drivers. In 2019, ride-hailing companies provided 91.1 million rides in Massachusetts, concentrated in the Boston area.

The lawsuit, filed in Suffolk Superior Court, is based on Massachusetts’s 2004 wage and hour law, which defines what constitutes an independent contractor versus an employee. Workers who are independent contractors are not entitled the same benefits as employees, such as minimum wage, overtime pay, health insurance, paid sick leave and unemployment benefits. Employees must also be compensated for business expenses, like gas or auto insurance.

The 2004 law was passed in the wake of a study showing rampant “misclassification” of workers in the state’s construction sector as independent contractors and not employees.

Healey argues that under state law, drivers for ride-hailing platforms are employees. Uber and Lyft set the price for rides, set the conditions of drivers’ employment and can terminate drivers for not adhering to their standards. Uber and Lyft set drivers’ pay – without telling them how much they will be compensated per ride — and incentivize them to choose shifts that help the company. They impose driver performance standards and can penalize drivers who do not accept enough rides, cancel too many rides, or do not maintain customer service standards. Uber and Lyft assign rides and track drivers’ activities through their apps.

Healey says Uber and Lyft are effectively paying drivers less than minimum wage, since drivers are not compensated for time spent waiting between rides or driving between fares. They do not get overtime pay no matter how many hours they work, and they are not reimbursed for expenses.

While Uber and Lyft did provide paid sick time during the COVID-19 pandemic, that only applies to drivers who have a documented diagnosis of COVID-19 or are put under quarantine by a public health agency. Otherwise, the state’s broader sick leave law does not apply to them.

Healey is asking a judge to require Uber and Lyft to designate its drivers as employees and treat them accordingly.

Uber and Lyft say most drivers work part-time as a way to earn extra income part-time or between jobs. The drivers value the flexibility of being able to drive limited hours on their own schedule, which may change if the companies are forced to hire them as employees. Both companies cited a national survey by the website Ride Share Guy, which found that two-thirds of drivers want to stay as independent contractors.

Unions are supporting the attorney general’s suit. Steve Tolman, president of the Massachusetts AFL-CIO, said Uber and Lyft intentionally misclassify workers “to make it harder for their workforce to organize a union and to avoid basic standards of worker protections.”

Felipe Martinez, an Uber and Lyft driver from Andover who is chairman of the board of the Boston Independent Drivers Guild, which is trying to organize drivers into a union, said since he started driving in 2017, his pay has decreased due to the company’s algorithm. He does not receive benefits and can be deactivated as a driver at any time. Uber controls where he drives and how much he gets paid. When the pandemic broke out, Martinez said, “the lack of worker rights became a life or death issue” since drivers lacked paid sick leave.

David Weil, dean of the Heller School for Social Policy and Management at Brandeis University and the head of the US Department of Labor’s wage and hour division under former President Barack Obama, said there has been a growth in recent years of business models like Uber and Lyft. He said these businesses “set out often in painstaking detail” the conditions of employment but treat workers as independent contractors. “They get the benefits of control and management of their workforce but sidestep their responsibility to workers under state law and federal law,” Weil said in a conference call organized by Healey.

There have been private suits filed by drivers against Uber and Lyft, but no judge has ever ruled on the underlying question of driver classification.

Shannon Liss-Riordan, a Boston-based labor attorney who has brought cases representing drivers in Massachusetts and California, said the companies have put mandatory arbitration clauses in their driver contracts, which make it difficult to bring a lawsuit. She has had to instead file thousands of arbitration cases on behalf of individual drivers, after judges ruled she could not pursue class action cases. She does have a request for an emergency injunction against Uber and Lyft pending before the US Court of Appeals in which she is arguing that during the COVID-19 pandemic, the companies must provide drivers with paid sick leave in accordance with Massachusetts state law.

Liss-Riordan said the attorney general has the authority to seek a declaratory judgment based on the company’s business behavior, which a private driver does not have. “Hopefully, this may be the beginning of a real change,” Liss-Riordan said.