One effective method for businesses to cut costs is by using independent contractors, rather than employees. Companies only have to pay independent contractors for the work they do, rather than paying them a salary or an hourly rate for a certain number of hours. Companies also don’t have to worry about helping independent contractors pay their taxes, their health insurance, or Social Security. Independent contractors also cover all their own business expenses and provide their own work-related materials.
Because independent contractors are shouldering these burdens themselves, and they’re exempt from the protections the law extends to employees, the federal Fair Labor Standards Act (FLSA) is very specific about the requirements a worker needs to meet in order to be classified as an independent contractor. Workers must be able to make their own hours, control the environment they work in, and wear what they want while working.
According to a recent class action wage and hour lawsuit against Lyft, the popular ride-hailing service, the company allegedly illegally classified its drivers as independent contractors. Although the drivers were given the ability to make their own hours, they allegedly did not meet many of the other requirements for independent contractors.
According to the class action lawsuit, Lyft allegedly deactivated drivers from their platforms without any notice and without providing a reason for their deactivation.
The wage and hour lawsuit alleged that, because the drivers did not meet the qualifications for employees, they should not have been made to pay for their own expenses, including the costs of gas and maintaining their own vehicle.
Lyft has recently reached a settlement agreement with the class of plaintiffs that does not include classifying the drivers as employees, but the company has agreed to pay $12.25 million in damages, to give notice to drivers if they are deactivated from the platform, and to only deactivate drivers for specific reasons, like low ratings from passengers. It has also agreed to give drivers notice prior to their deactivation and give the drivers a chance to present their side of the story.
Part of the reason the plaintiffs agreed to the settlement, even though it doesn’t cover everything they were initially asking for, is because Lyft’s arbitration agreement would have made it much more difficult for the drivers to sue as a class. Lyft is maintaining its arbitration policy, but under the terms of the settlement agreement, Lyft will cover the arbitration costs of any driver with disputes over their compensation, or who wants to challenge their deactivation.
Another plausible reason for the drivers agreeing to the settlement could be that Lyft treats its drivers relatively well. Lyft’s rival, Uber, has been faced with a similar class action lawsuit from its drivers alleging they have been misclassified as independent contractors, when they should be paid as employees. That lawsuit is scheduled to go to trial in June.
Shannon Liss-Riordan, one of the attorneys representing the drivers in the dispute with Lyft, said her offices get many more complaints from Uber drivers than from Lyft drivers. This disparity suggests Lyft may have been treating its drivers with more respect than Uber even before the lawsuit.
The Chicago class action attorneys at the Chicago Overtime Law Center have three decades of experience fighting to help employees who are victims of wage, overtime and tip theft by their employers. We have a team of Chicago unpaid overtime lawyers who concentrate on prosecuting state and nationwide class action lawsuits. Our attorneys work out of Chicago and Oak Brook offices and pursue claims for workers all over the Chicago area including Wayne, Yorkville and Plano. We protect unpaid workers who haven’t received overtime throughout the Chicago area including in DuPage, Will, Kendall, Lake, McHenry, Kane and Cook Counties.
Our North Aurora and Streamwood overtime lawyers are intimately familiar with the issues that arise during wage claim litigation, and we know the laws that govern overtime cases well. Many employers mis-classify employees as being exempt from overtime laws and pay workers salaries instead of hourly wages in order to avoid paying them overtime. Some employers mistakenly classify employees as exempt and others intentionally do so in order to circumvent the law. In either case, workers do not receive the wages they should, and a lawsuit may be the only way to recover their earned wages.
The Chicago Overtime Law Center is based in Chicago, and represents clients throughout the country who have unpaid overtime and other employment right claims.