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Will Courts Ever Settle the Independent Contractor v. Employee Debate?

By Casey C. Sullivan, Esq. | Last updated on

Are workers like Uber drivers or GrubHub deliverymen independent contractors or employees? This is one of the central questions in a growing sector of the economy, where app-based companies can help you get a ride to the airport or send someone over to do your laundry. Most of those companies treat such workers as contractors, while those workers are increasingly demanding recognition as employees.

Two major cases, driver-led lawsuits against Uber and Lyft, were set to help end the debate. But now that those lawsuits are headed toward settlement, will we ever get a definitive ruling on the issue?

Drivers Challenge Contractor Classification

With a few taps on your smartphone, you can hail a cab, have a bottle of booze delivered, or summon a dog walker to take out Fido when you have to work late. In the eyes of some, these drivers, couriers, and dog walkers are enterprising independent contractors, picking up a side job here and there. Hence the name the "gig economy."

But to a growing number of such workers, they are in fact employees. The distinction is significant, determining who pays for gas and vehicle maintenance, who covers employment taxes, or where liability falls when torts are committed on the job.

In the Uber and Lyft litigation, drivers had made similar claims regarding their classification. The companies exercised significant control over their activities, they said, rendering them employees. They pointed to company controls over their hours, their pay, and the way they complete their work.

When the lawsuits were first filed, with celebrated labor lawyer Shannon Liss-Riordan at the helm of each, commentators speculated that the suits could bring down the business model behind the gig economy.

That hasn't been the case just yet.

Settlements Put Off Final Ruling on Classification Question

Both Uber and Lyft moved quickly to settle the suits. In Uber's case, the company offered up to $100 million to end the litigation. Lyft followed a similar approach.

Both Uber and Lyft's settlements were originally rejected. But after Lyft more than doubled its settlement offer, from $12.5 million to $27 million, the settlement was approved last Thursday by U.S. District Judge Vince Chhabria.

Under the terms of that settlement, Lyft will change parts of its driver terms of service, but the question about the driver's status will not be answered. "The agreement is not perfect," Judge Chhabria wrote. "And the status of Lyft drivers under California law remains uncertain going forward." That question "will have to wait for another day," according to Liss-Riordan.

Speaking of waiting, Uber drivers too must wait for the conclusion of their suit. The driver's lawsuit has been stayed since November, as Uber appeals a court ruling on its arbitration clause. In a separate lawsuit, the Ninth Circuit ruled that drivers must go to arbitration over their employment disputes.

For now, it looks like we won't be getting any definitive rulings on the independent contractor / employee issue. But "not today" doesn't mean never.

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