Labor & Employment Law Daily Lyft drivers denied bid for emergency order to force A.B. 5 reclassification
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Monday, April 13, 2020

Lyft drivers denied bid for emergency order to force A.B. 5 reclassification

By Ronald Miller, J.D.

The court saw the drivers’ motion as a hurried attempt to capitalize on the coronavirus pandemic.

A request by Lyft drivers for an emergency motion to require the rideshare company to immediately reclassify its drivers from “independent contractor” to “employee” status in light of California’s new law, A.B. 5, was denied by a federal district court in California. Although sympathizing with the drivers’ frustration with the company’s refusal to comply with the law, the court characterized the motion as a hurried attempt to capitalize on the coronavirus pandemic, and noted that it was filled with defects. In the final analysis, it found that the Lyft drivers were not transportation workers exempt from the provisions of the Federal Arbitration Act, and granted the company’s motion to compel individual arbitration of the drivers’ misclassification claims. It struck the class allegations because the drivers waived the right to represent a class in any forum under the “Lyft Terms of Service” (Rogers v. Lyft, Inc., April 7, 2020, Chhabria, V.).

Emergency motion. In the midst of the coronavirus pandemic, three Lyft drivers filed an emergency motion to require the rideshare company to reclassify all of its drivers in California from independent contractor to employee status, as required by California’s new law governing worker classification. “While the status of Lyft drivers was previously uncertain,” the court noted, with the passage of A.B. 5, “it is now clear that drivers for companies like Lyft must be classified as employees.”

In the plaintiffs’ view, if Lyft is forced to reclassify its drivers, those drivers will potentially qualify for sick pay under California law. Sick leave policies generally decrease the chance that people will go to work sick. Especially during this public health crisis, the public interest favors more access to paid sick leave so that people will avoid going to work sick and risk exposing others. However, denying their request for a “public injunction,” the court said the question of whether Lyft drivers qualify for paid leave under California law is less of an emergency than plaintiffs suggest, for at least three reasons.

Sick pay is minimal. First, even if the drivers were reclassified, the amount of sick pay involved would be small. Although a few drivers would qualify for three days’ worth of sick pay per year (the amount at which employers can cap usage under California law), most Lyft drivers would not qualify because roughly 41 percent of the drivers haven’t accrued enough hours of work for sick pay at all. Moreover, even for those that do qualify, a significant percentage would get four hours (that is, a half day) or less.

Emergency assistance available. Second, if the court ordered Lyft to reclassify the drivers immediately, the drivers could lose the opportunity to obtain thousands of dollars in emergency assistance from the federal government. The Families First Coronavirus Response Act (FFCRA) makes independent contractors eligible for up to ten days of paid sick leave in the form of refundable tax credits. As employees, the Lyft drivers might not qualify for those benefits. Additionally, as independent contractors, they can apply for a forgiveable small business loan through the Paycheck Protection Program.

A better deal for independent contractors. Third, even if the drivers wouldn’t lose federal relief upon reclassification, the small amounts of paid sick leave that would be available to some Lyft drivers under California Labor Code § 246 pales in comparison to the assistance workers will be able to get from the emergency legislation, including 39 weeks of unemployment assistance for independent contractors who cannot work or lost their job due to the coronavirus.

California law. A.B. 5, which became operative January 1, 2020, makes clear that a company’s workers must be classified as employees if the work they perform is not outside the usual course of a company’s business. Lyft’s drivers provide services that are squarely within the usual course of the company’s business. Nevertheless, companies like Lyft have resisted complying with the clear legal obligation. Still, the court had to resolve whether the plaintiffs’ individual claims must be submitted to arbitration, and also whether the plaintiffs waived their right to pursue claims on behalf of a class of Lyft drivers in California.

Arbitration. First, the court addressed Lyft’s motion to compel arbitration. The Ninth Circuit, in Toyo Tire Holdings of Americas, Inc. v. Continental Tire North America, Inc., held that “a district court may issue injunctive relief on arbitrable claims if interim relief is necessary to preserve the status quo and the meaningfulness of the arbitration process.” However, in this instance, the requested injunction “goes well beyond simply maintaining the status quo” by ordering a party to take affirmative action. The plaintiffs want now what an arbitrator might (or might not) provide later: an order compelling Lyft to reclassify all California drivers as employees. Court-ordered reclassification of Lyft drivers prior to arbitration would displace, rather than preserve, the arbitration process.

FAA exemption. The parties disputed whether the FAA applies to the Lyft drivers. The FAA’s first provision, 9 U.S.C. § 1, states that it does not “apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” The Supreme Court’s decision in New Prime, Inc. v. Oliveira settled that this transportation worker exemption also applies to independent contractors. So the only remaining question was whether the Lyft drivers engaged in foreign or interstate commerce. Finding no goods/passenger distinction in the FAA, the court determined that § 1 is not limited to workers who transport goods in interstate commerce. The longstanding modern definition of “in commerce” continues to be “persons or activities within the flow of interstate commerce.”

However, Lyft found more solid footing with its argument that, even if the transport of passengers qualify for the transportation worker exemption, the drivers don’t belong to a class of workers “engaged in foreign or interstate commerce.” The narrower meaning of “engaged in foreign or interstate commerce” dictates that only those classes of workers that transport goods or passengers across state lines (or international boundaries) can qualify for the exemption. However, the work of the Lyft drivers predominantly entailed intrastate trips. Thus, the court concluded that as a class, the drivers were not engaged in interstate commerce. Interstate trips that occurred by happenstance of geography did not alter the intrastate transportation function performed by the class of workers. Nor did the fact that Lyft drivers frequently pick up and drop off people at airports and train stations mean that they are, as a class, engaged in interstate commerce. The Lyft drivers’ “relationship to interstate transit is only casual and incidental,” and they lack the requisite “practical, economic continuity” with interstate air or rail transportation.

Because the FAA’s transportation worker exemption does not apply to Lyft drivers, the parties’ arbitration agreement is subject to the FAA and is enforceable.

Waiver. Moreover, the terms of the service agreement between Lyft and its drivers allocate most threshold issues to the arbitrator. Further, under the agreement, the drivers waive their right to pursue class, collective, or representative claims. Accordingly, Lyft was granted its motion to compel the plaintiffs’ claims for individualized relief. Further, the class allegations were stricken because the plaintiffs waived the right to represent a class in any forum.

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