It's been a big week for sharing economy litigation.
On Tuesday night, Lyft announced a $12.25 million settlement in a class action employment lawsuit brought by its drivers. On Wednesday, the Ninth Circuit Court of Appeals denied Uber's motion to stay a trial, meaning that Uber is set to go to court on June 20 over a massive class action lawsuit that potentially engulfs over a hundred thousand drivers.
Since the Lyft settlement does not reclassify drivers as employees, rather than independent contractors, it is not a slam-dunk victory for the drivers that brought the lawsuit. However, as Uber heads to trial, there's a real possibility that this other case might turn out differently—which would make for a monumental hit to the sharing economy.
Either way, whether through such major shake-ups or through smaller incremental changes, the state of employment inside the sharing economy is changing.
In addition to the $12.25 million payout, Lyft has also agreed to "make changes in its product and Terms of Service with drivers," according to a spokesperson for the company. The company also noted that the settlement does not reclassify drivers as employees, commenting, "Roughly 80 percent of drivers who use the Lyft platform drive 15 hours per week or less to supplement their incomes."
The plaintiffs' attorney in this case, Shannon Liss-Riordan, said in an official statement, "While the settlement does not achieve everything we had hoped for—namely a reclassification of the drivers as employees… it will result in some significant changes that will benefit the drivers."
According to Liss-Riordan, the settlement also prevents Lyft from terminating drivers at will, and to challenge a deactivation in front of a neutral arbitrator that Lyft pays for. It also empowers drivers to "take up pay-related issues, if they feel they haven't been paid properly, again before a neutral arbitrator at Lyft's expense."
Liss-Riordan also stated that the arbitration clause in the Lyft contract would have made it difficult to win this case at trial. "Unfortunately, the US Supreme Court has been allowing companies to use arbitration agreements to ban class actions, and there are fewer and fewer arguments available to employees and consumers to challenge these agreements," she said.
That's a stark difference from the Uber case, where various versions of the arbitration clause over time have been thrown out in court.
And while the Lyft case is now over, the Uber litigation is hurtling towards trial. The company tried to get the appeals court to stay the trial—meaning, delay it. Uber's reasoning was that it was currently appealing the lower court's decision to invalidate many arbitration agreements between Uber and its drivers. However, the Ninth Circuit has denied the motion to stay. The actual appeal is still pending, but the refusal to halt the swiftly incoming trial date is certainly a blow to the company.
Uber is still waiting for the Ninth Circuit to rule on yet another appeal. In September 2015, district court judge Edward Chen certified a class of 160,000 drivers. The company appealed the decision.
Uber's lead attorney, Theodore Boutrous, said in an official statement that they "looked forward" to the Ninth Circuit's decision, and that, "If the case moves forward, we'll look forward to presenting the facts about how drivers use Uber with complete flexibility and control over their work to a jury in June 2016."
In 2011, Boutrous argued Wal-Mart v. Dukes in front of the Supreme Court, ultimately winning the case. The decision in Dukes—very much like the Supreme Court precedent around arbitration that Shannon Liss-Riordan mentioned in her statement—made it harder to certify large classes in general.
Liss-Riordan's Boston-based law firm, Lichten & Liss-Riordan, has made a boutique practice out of sharing economy lawsuits. Lawsuits (either pending, settled, or currently in arbitration) that they have brought include the following:
It's not clear what all this litigation will really mean for the sharing economy. Many drivers pick up fares from both Lyft and Uber (and some work additional sharing economy gigs as well). If the drivers win everything they want from Uber, they'll have a judgment that they are employees of one ride-sharing company, while the Lyft settlement says they are independent contractors of another. Either way, both sharing economy companies and sharing economy workers should watch the Uber case closely as it plays out.
*This post has been updated to more accurately reflect which sharing economy companies have been sued.