Spoiler Alert: Rulings Expected on Uber and Lyft Independent Contractor Settlements

by Pepper Hamilton LLP
Contact

Judges in California will likely soon issue rulings affecting two ride-sharing companies, Uber and Lyft. Those connected with the Lyft case will be pleased because it is expected that a federal district court judge in San Francisco will formally approve a $27 million settlement in an independent contractor misclassification case against Lyft. In contrast, those involved in the Uber case pending in a state court in Los Angeles will have to accept a judicial setback when the judge handling that case is expected to formally disapprove of a $7.75 million settlement of so-called PAGA claims asserted on behalf of hundreds of thousands of Uber drivers. But, as noted below, that will not displease the plaintiffs’ lawyers involved in other Uber class action IC misclassification cases.

The Lyft Settlement Being Approved

Lyft had originally entered into a proposed agreement to settle its drivers’ IC misclassification claims for $12.25 million, but Judge Vince Chhabria rejected that settlement as inadequate, as more fully detailed in our March 15, 2016 blog post.  Following the rejection of that proposed settlement, the parties returned to Judge Chhabria with a proposed settlement of $27 million.

Objections to the higher proposed settlement were filed by a few class members, a Teamsters local, and the “Uber Lyft Teamsters Rideshare Alliance,” nicknamed ULTRA. Those objections were principally aimed at the fact that the settlement allows Lyft to maintain its classification of the drivers as independent contractors and not reclassify them as employees. If the drivers were reclassified, federal labor laws would permit the Teamsters to unionize the drivers; otherwise, as independent contractors, they remain ineligible for union representation.

According to Shannon Liss-Riordan, the lead counsel for the drivers, those that drove the most will be receiving thousands of dollars. So far, approximately 95,000 Lyft drivers have reportedly elected to participate in the settlement.

In addition to the financial terms of the settlement, the principal terms include:

  • Lyft will no longer be able to deactivate drivers at will, for any reason, and instead will only be able to deactivate drivers for specific reasons or after providing notice and an opportunity to cure. Drivers deactivated will be able to arbitrate their deactivation, with Lyft paying for the fees of arbitration. (Evidently, the drivers may have to pay their own legal fees if they choose to hire counsel to represent them at the arbitration.)
  • Lyft will provide additional information about potential passengers to drivers prior to the driver accepting any ride request, which presumably will assist drivers in deciding whether to accept a ride request.
  • Lyft will create a “favorite” driver option where drivers who are designated by riders as a “favorite” are entitled to certain benefits.
  • In exchange for the above, all class members (except those who “opt out” of the settlement) will waive all existing claims they may have against Lyft arising from their alleged misclassification as independent contractors.

The settlement will cover all Lyft drivers who made at least one trip for Lyft in California between May 25, 2012, and July 1, 2016. The case is Cotter v. Lyft Inc., No. 13-cv-04065 (N.D. Cal.).

The Uber Settlement Being Rejected

Uber has been sued around the country, including California. The principal case in that state is the O’Connor case, which is pending before Judge Edward Chen in federal court in San Francisco. O’Connor v. Uber Technologies, Inc., No. 3:13-cv-03826-EMC (N.D. Cal.). That case seeks damages for allegedly unreimbursed automobile, cell phone, and other expenses and includes a claim under the California Private Attorney General Act (“PAGA”).  Under PAGA, private litigants sue in place of the State and seek recovery for monies that would have been owed to the State if the government had conducted the lawsuit instead of private litigants. In a PAGA lawsuit, the private litigants keep a smaller portion of the recovery while the State receives the larger portion.

Another California case against Uber is pending in Los Angeles Superior Court before Judge Maren E. Nelson.  Price v. Uber Technologies Inc., No. BC554512 (Super. Ct. Los Angeles County). That lawsuit also asserts PAGA claims that overlap with those being sought in the federal case pending in San Francisco. Counsel for Uber and the class representatives in the Los Angeles case had submitted to the judge a proposed $7.75 million settlement of the PAGA claims.

Judge Nelson is likely to formally reject the proposed settlement, reportedly noting (among other concerns) that she wished to make sure the settlement in her Los Angeles case would not adversely affect the rights of drivers in the San Francisco case. Many Uber drivers have filed objections to the proposed settlement, which may pay each of the many hundreds of thousands of Uber drivers only a few dollars each, after payment of their attorneys’ fees.

Judge Nelson also reportedly told the lawyers for the drivers and Uber that she needed more information about the financial fairness of the proposed settlement, and was also seeking information on the PAGA claims from the California agency in charge of such claims.

Notably, lawyers for plaintiffs in other PAGA lawsuits against Uber have made known their objections to the proposed settlement in court filings. Those lawyers cite issues as to both the modest amount of the settlement and the impact of the settlement on their lawsuits against Uber.

In the San Francisco case, Judge Edward Chen last rejected a $100 million proposed settlement. As noted in our August 18, 2016 blog post, Judge Chen rejected that  settlement in large part because of his objections to the amount allocated to the PAGA claims.  He mentioned that the State agency in charge of such claims had estimated the value of the PAGA claims at $1 billion.

As we have noted in prior blog posts, Uber has received mixed results in legal challenges brought against it around the country, winning and losing some cases brought by individual drivers before administrative agencies and arbitrators.

Analysis and Takeaways

Uber and Lyft have dominated the headlines in defense of their independent contractor relationships with drivers and efforts to settle a bevy of class action lawsuits brought against them. Both companies had hoped to win their California class actions by making motions for summary judgment. But both were dealt setbacks two years ago when two separate federal judges denied their motions and set down those cases for trial. No trials have been held in either of those cases, both of which have now been the subjects of proposed settlements.

As we noted in our September 18, 2014 blog post entitled “Silicon Valley Misclassification,” we observed that tech companies that use the 1099 “on demand” business model were at risk if they “do not take care to structure, document, and implement their independent contractor relationships in a manner consistent with federal and state IC laws.”

That does not mean, however, that on-demand and other companies using independent contractors cannot prevail on IC misclassification claims.  To the contrary, the court’s decision in the Uber summary judgment opinion pointed to two recent cases where courts in California found workers to be independent contractors as a matter of law.  As Judge Chen noted, even though some factors may have “cut in favor of employee status,” courts will still find IC status when “all of the factors weighed and considered as a whole establish that [an individual] was an independent contractor and not an employee.”

So, how does a company avoid class action IC misclassification cases or, if sued, prevail in the lawsuit and secure a judgment that its 1099ers are legitimate ICs?

While Uber and Lyft can afford costly class action settlements, most other on-demand start-ups can’t. And investors don’t wish to pour money into business models that are future targets of class action lawyers and workforce agency regulators.  As we noted in our March 12, 2015 blog post on the courts’ denial of the motions for summary judgment by Uber and Lyft, many new and existing companies have resorted to IC Diagnostics™ to enhance their level of IC compliance and determine whether a group of 1099ers would pass the applicable tests for IC status under governing state and federal law.  That proprietary process also offers a number of practical, alternative solutions to enhance compliance with those laws, including: restructuring, re-documenting and re-implementing the IC relationship; reclassifying 1099ers as W-2 employees; and redistributing 1099ers – as more fully described in our White Paper on the subject.

Companies that wish to retain an IC business model generally opt for restructuring, re-documenting, and re-implementing their IC relationships. While not all companies can eliminate their control and direction over workers treated as 1099ers, the overwhelming number can effectively restructure their IC relationships to comply with federal and most state IC laws. The IC Diagnostics™  process provides the means to stress-test the IC relationship. If it can be effectively restructured to comply with IC laws, the next step in the process is re-documentation.  What seems like a simple act of dotting your i’s and crossing your t’s, though, is anything but; indeed, many IC statutes and most judicial and administrative decisions in this area are often counter-intuitive.

In our August 29, 2014 blog post entitled “Earthquake in the Independent Contractor Misclassification Field,” we noted that FedEx Ground lost a key case because of its misplaced reliance on an IC agreement and its policies and procedures that were good, but not good enough.  As we stated in that blog post: “IC agreements and policies and procedures that are not drafted in a state-of-the-art manner, free from language that can be used against the company, can cause businesses that use ICs to face class action litigation or regulatory audits or enforcement proceedings they may be able to otherwise avoid.”  For most businesses using ICs as part of their business model or to supplement their workforce, it is never too late to restructure and re-document their IC relationships.

The implementation of a legitimate IC relationship is also essential. Even when a company’s contractual provisions are drafted in a manner intended to be consistent with IC laws, a company’s failure to strictly follow contractual limitations on direction and control can lead to an adverse ruling. There is no reason, though, why a company committed to complying with IC laws cannot, when exercising both rigor and restraint, implement and carry out in practice an enhanced IC relationship.

Written by:

Pepper Hamilton LLP
Contact
more
less

Pepper Hamilton LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.