Mass. AG Sues Uber & Lyft Over Misclassification of Drivers

In a new law suit invoking the Massachusetts Wage and Hour Laws, the Massachusetts Attorney General Maura Healey has brought suit against two of the country’s largest ride-sharing companies: Uber & Lyft.

“Uber and Lyft have built their billion-dollar businesses while denying their drivers basic employee protections and benefits for years,” said AG Healey. “This business model is unfair and exploitative. We are seeking this determination from the court because these drivers have a right to be treated fairly.”  

In the complaint filed in the Suffolk Superior Court, the Attorney General’s Office seeks a declaratory judgment that persons doing work for Uber Technologies Inc. and Lyft Inc. should be classified as employees rather than independent contractors under Massachusetts law. By correctly classifying these workers, the AG argues that drivers will have greater access to certain rights under the law including ‘critical labor rights and benefits, such as minimum wage, overtime, and earned sick time’.

Analysis centers on a three-part test to determine an independent contractor

The Attorney General’s argument in the case centers on a three-part test elaborated in Massachusetts case law that courts use in order to determine whether an individual should be classified as either employee or an independent contractor.

The three elements of the test, as stated by the AG’s Office, are that::

• The worker is free from their direction and control;
• The services the worker performs are outside the usual course of their business; and,
• The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the service performed for the party.

Neither Uber nor Lyft, the AG argues, is able to meet the necessary requirements under the test in order to classify their workers as independent contractors. According to the AG, both companies’ worker classification systems fail the first prong of the test:, namely that Uber and Lyft drivers are free from the company’s direction and control. The alleged lack of control for the companies over their drivers, per the AG, stems from the agreement between Uber and Lyft and their drivers and the fact that these drivers must enter into a standardized service agreement with the companies prior to working for them.

To the AG, these contracts include various conditions which cast doubt on the fact that drivers for Uber and Lyft are truly ‘independent’. These conditions include:

• non-negotiated contract terms and conditions;
• performance standards;
• forced arbitration provisions barring drivers the right to bring private legal actions under state Wage & Labor Laws;
• close monitoring of drivers’ activities through company apps
• financial incentives to induce drivers to work more shifts;
• penalization methods based on an individual’s driving metrics;
• a complicated pay structure using ever-evolving and complicated calculation formulas.

The contracted drivers provide an essential service to each of these companies’ core business since both transportation service providers would ‘cease to exist’ without their drivers. Additionally, the AG’s Office asserts that these drivers could hardly be considered engaged in an independent endeavor since they are not involved in an independently established business nor have the ability to grow their business using their own individual abilities. Instead. the AG’s Office says it is Uber and Lyft relying on and benefiting directly from drivers’ “fare volume under the companies’ required fee-splitting arrangements’.

Denied basic protections under Massachusetts Law

Accordingly, by misclassifying its workers, the AG’s complaint concludes that Uber and Lyft have denied their drivers the basic protections provided them under Massachusetts Wage and Hour Laws. These include state minimum wage and overtime or the reimbursement of necessary business expenses such as insurance, fuel, and maintenance costs.

As such, the AG’s Office states that it has asked the Superior Court for the declaratory judgment ordering Uber and Lyft to reclassify their drivers as employees in order that these individuals have “…the benefits and protections afforded by the Massachusetts Wage and Hour Laws, including those granted by the Wage Act, Minimum Wage Law, Overtime Law, Earned Sick Time Law, and Anti-Retaliation Statutes.”