O'Connor et al v Uber Technologies Inc, US District
Court, Northern District of California, 11 March 2015
C-13-3826 EMC, Judge Edward M. Chen Cotter et al v Lyft, Inc.,
US District Court, Northern District of California, 11 March
2015, 13-cv-04065-YC, Judge Vince Chhabria
"Sharing economy" business models are increasingly in
the legal news, usually under attack or some form of scrutiny. This
is not restricted to disputes between taxi regulators and Uber, nor
between hotel regulators and AirBNB.
Each of Uber and Lyft have recently been targeted in proposed
class action lawsuits brought by former drivers in California, who
claim that the companies are employers and owe duties arising from
employee protection legislation alleged to apply for the benefit of
their drivers. In each case, motions by Uber and Lyft for summary
dismissal have been denied, by two different judges on March 11,
Uber and Lyft had each argued (among other things) that they had
no employment relationship with the drivers, since the companies
only provided a match-making service through novel software and
network system by which persons wanting a ride could be matched
with other persons having vehicles. In this characterization, the
drivers supplied no services to the companies' benefit.
Both courts declined to characterize their business models this
way, and each judge ruled that the essence of each company's
business was to provide transportation services to passengers
– thus, the work-product of the drivers provided a service to
Uber and Lyft, and not directly to third-party passengers. This
meant that there is a presumption under California law that the
Uber and Lyft drivers were employees and not independent
contractors since they provided service to the benefit of the
companies, and that the burden in the litigation then falls on Uber
and Lyft to provide persuasive evidence otherwise. Each court held
that, in each case, since there was a triable issue and since the
result would be based upon facts, the question of mixed fact and
law is raised, which now has to be sent to a jury, and that this
precluded a summary dismissal of each case.
In both courts, but in a pointed manner in the Lyft judgement,
the rulings make clear that the arrangement between sharing-economy
business model operators and the people who actually "do the
work" is not clearly or simply either an employment
relationship (where the company exerts large degrees of control
over the workers and the manner of doing the work), nor clearly an
independent relationship (where the companies each retained a large
degree of control over the quality of the performance of the work,
including monitoring, ranking and using ratings to allocate work
and terminate relations; and behavioural control based upon a
contracted company ability to "terminate at will without
In each of these reported cases, the analysis is not superficial
but quite sophisticated, and it is very interesting to observe how
the courts cut through arguments that old laws can't apply to
new "sharing economy" business models by performing the
analysis of the basics of the business results achieved and the
actual business operations of the defendant companies. These are
interlocutory or preliminary motions, so these cases will be worth
watching and will be instructive, as more business is structured in
decentralized, network mediated, "sharing" paradigms.
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