Massachusetts filed a lawsuit against Uber and Lyft on Tuesday claiming the app-based companies are misclassifying drivers as independent contractors rather than employees. The state is the latest to challenge the way the multibillion-dollar ride-hailing industry treats its workers.
“For years Uber and Lyft have built their billion-dollar businesses on a model that exploits drivers,” Massachusetts Attorney General Maura Healey said in a video message announcing the lawsuit. “Uber and Lyft set the rates. They alone set the rules. Drivers are employees.”
Massachusetts is the second state to sue Uber and Lyft over the misclassification of drivers. In May, California Attorney General Xavier Becerra, along with city attorneys of Los Angeles, San Francisco, and San Diego, sued the companies, arguing that their drivers were misclassified as independent contractors when they should be employees under the state’s AB5 law that went into effect on January 1st. Becerra recently filed a motion for a preliminary injunction that would compel the ride-hailing companies to reclassify drivers as employees within weeks.
Previously, Healey signaled that Massachusetts could become the next state to take Uber and Lyft to court over driver classification. In March, her office filed an amicus brief urging a federal judge to order the companies to immediately reclassify their drivers as employees and provide them with paid sick leave, saying it could help stem the spread of coronavirus.
“The bottom line is Uber and Lyft have gotten a free ride for far too long,” Healey said on Tuesday. “For years these companies have systematically denied their drivers basic workplace protections and benefits, and profited greatly from it. This business is unfair and it’s also illegal under Massachusetts law.”
Uber and Lyft have long argued that drivers don’t want to be classified as employees, preferring the flexibility to set their own schedules and drive for multiple apps that come with gig work. “Our drivers consistently tell us that the reason why they value Uber is they value their freedom,” Uber CEO Dara Khosrowshahi said on the earnings call last year. “They’re their own boss. They run their own business.”
Now, the companies are using the pandemic to argue that states seeking to challenge their classification of drivers are imperiling jobs.
“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,” an Uber spokesperson said in a statement. “We will contest this action in court, as it flies in the face of what the vast majority of drivers want: to work independently. We stand ready to work with the state to modernize our laws, so that independent workers receive new protections while maintaining the flexibility they prefer.”
“This lawsuit threatens to eliminate work for more than 50,000 people in Massachusetts at the worst possible time,” a Lyft spokesperson said in a statement. “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. Across the country, drivers have said they want to remain independent contractors over employment by a 4 to 1 margin.”
Drivers have long complained about poor pay, lack of protections, and an inability to band together as a union to effect change. There have been stories about drivers sleeping in their cars because they can’t afford to live in the cities where they work, struggling to make ends meet, and feeling at the mercy of a faceless algorithm that dictates their every move.
If the lawsuit is successful, tens of thousands of Massachusetts drivers could be eligible for the type of benefits traditionally associated with full-time employment: health insurance, workers’ compensation, unemployment insurance, and a minimum wage guarantee.
But more importantly, it could accelerate the fragmentation of the ride-hailing industry, in which drivers are treated as employees in some states, and contractors in others. Experts predict the companies will likely pass those costs along to consumers through higher fares with only a modest impact on demand.