AG’s Office Says Payments Flow Through Company, Supporting Its Role As An Employer
BOSTON, MAY 13, 2024…..Uber and Lyft kicked off a defense of their worker classification status quo Monday by pitching themselves as technology companies that facilitate easier transportation, not outright transportation providers.
Laying out the case they will make before a Suffolk Superior Court judge over the coming weeks, state prosecutors alleged that Uber and Lyft have long violated state law by treating drivers as independent contractors instead of employees, while attorneys for the ride-for-hire platforms contended that they connect drivers and passengers without exerting the traditional control of an employer.
Attorneys for the companies — who voiced uncertainty about whether or how Uber and Lyft could continue to operate in Massachusetts if the judge rules against them — said repeatedly in their opening arguments that drivers are free to work as little or as much as they want, set their own schedules, and cross back and forth between competing platforms.
The core business of Uber and Lyft, their lawyers argued, is the technology connecting drivers and potential riders through apps, not the trips themselves. One Uber attorney pointed out the company does not “own a fleet of cars or trucks,” and likened it instead to a travel agent, who steers would-be vacationers toward local transportation options such as bus tours.
“But a travel agent isn’t a provider of transportation,” said Michele Maryott, a member of Uber’s legal team. “A travel agent is an intermediary between those who want a service and those who have a service to provide.”
Prosecutors in Attorney General Andrea Campbell’s office will make the case that despite the companies’ emphasis on the apps, their success is “directly dependent” on the work that drivers perform. The complaint alleges that Uber and Lyft have boosted their profits by treating drivers as independent contractors, thereby denying them access to the same wage protections and benefits as employees.
Assistant Attorney General Doug Martland said Monday that the consequences drivers can face for receiving consistently low ratings and the way trip fares work reflect significant control the companies hold over workers. Riders pay the company, he said, which takes its cut and then directs the remainder toward the driver.
Martland called that the “primary revenue stream” for Uber and Lyft, whose share of each ride can vary.
“What doesn’t vary is that Uber and Lyft determine the amount and the driver doesn’t know until after the ride is complete,” he said. “In other words, a driver transports the rider from point A to point B without ever knowing how much the rider paid for the ride or Uber and Lyft’s variable fee. What entrepreneur would do that?”
Maryott said that what riders know simply as Uber — the app providing passenger transportation on demand — represents less than half of the company’s revenue. The majority comes from Uber Eats, which offers food and grocery delivery, and from Uber Freight, which deals with large-scale shipping.
The legal teams representing both companies sought in opening arguments to portray most of their combined 90,000 drivers as preferring the existing dynamic, referencing many Massachusetts drivers by name and describing their individual circumstances, such as signing onto an app in between medical appointments.
Much of the arguments will focus on a section of state law known as the “ABC test,” enacted nearly a decade before Uber and Lyft began operating in Massachusetts.
The law lays out conditions an employer must meet to classify a worker performing a service as an independent contractor instead of an employee. Businesses need to fulfill three prongs: that the worker was “free from control and direction”; that the service provided is “performed outside the usual course of business of the employer”; and that the individual has their own independent business or trade.
Attorneys for both Uber and Lyft said Monday they believe the test will not even apply because apps provide services for drivers, not the other way around, by linking them to prospective riders.
Lyft attorney Felicia Ellsworth said “there are always two customers in every car”: the driver, and the passenger.
But even if the judge subjects the companies to the full ABC test, Uber and Lyft’s attorneys argued they can meet all three conditions.
One part of their defense will be the ubiquity of “multi-apping,” or drivers using more than one platform to find passengers or deliveries. Lyft data show about 44 percent of drivers used both Uber and Lyft simultaneously, attorneys said.
“An employee can’t do that. An employee couldn’t work at Dunkin’ Donuts at the same time they worked a shift at the Thinking Cup on Tremont,” Maryott said, adding that a driver could “use the Uber app one minute and the Lyft app the next, or even at the exact same time.”
Ellsworth referenced the state’s 2016 transportation network company law, which laid out a substantial regulatory scheme for the industry. Asked by Judge Peter Krupp how that law addressed driver classification, Ellsworth replied, “It’s silent.”
During debate on the legislation in 2016, the House rejected an amendment that would have defined drivers as employees and awarded them collective bargaining rights, and senators withdrew a similar proposal without seeking debate.
That amendment would have only applied employee status to the section of state law dealing with collective bargaining, and would not have explicitly amended a different chapter laying out the ABC test.
Campbell’s predecessor, now-Gov. Maura Healey, sued both companies in July 2020, about eight years after Uber launched in Massachusetts and seven years after Lyft began its Bay State operations.
In the time since then, Uber and Lyft joined with gig economy power players DoorDash and Instacart to pursue a ballot question campaign that would rewrite state law to define drivers as independent contractors. Their proposal could go before voters in November, if it survives an eligibility challenge.
It’s not clear whether Krupp will issue his ruling — which could reshape the campaign season — before Election Day.
Attorneys for both companies also said uncertainty hangs over their future operations should the judge order them to treat their drivers as employees.
Maryott said if Uber executives can figure out a way to operate under a full employment model — something she called “a gigantic if” — it would likely be unable to offer the same kind of flexibility it does today, pushing tens of thousands of drivers off the app.
“There would be no more independence for these drivers. There would be no ability to earn on their own terms,” she said.
Ellsworth said a ruling that drivers must be employees would “result in one less rideshare company,” not “tens of thousands of new employees.”
“The fact that Lyft does not know how an employment model could actually work is evidence that Lyft is not actually an employer, that the distinction Lyft has drawn is real,” Ellsworth said.
During her opening argument, Ellsworth recalled her own first job as a restaurant hostess. Her hours were set weeks in advance, Ellsworth said, and she needed permission to take time off.
Judge Krupp asked Ellsworth: if her restaurant boss had hundreds of other people who could jump in to fulfill her duties at a moment’s notice, would she be less of an employee? She said no because her work was controlled by the employer.
“I was not an independent hostess roving around looking for jobs elsewhere,” Ellsworth said.
Parties expect to call dozens of witnesses over the course of the trial, which should last several weeks. Krupp said Monday he expects the cumulative proceedings to total about 96 hours.
