Driving Courts Crazy: a Look at How Labor and Employment Laws Do Not Coincide With Ride Platforms in the Sharing Economy

• Jurisdiction: United States,Federal,California
• Citation: Vol. 95
• Publication year: 2021

95 Nebraska L. Rev. 853. Driving Courts Crazy: A Look at How Labor and Employment Laws Do Not Coincide with Ride Platforms in the Sharing Economy

Driving Courts Crazy: A Look at How Labor and Employment Laws Do Not Coincide with Ride Platforms in the Sharing Economy(fn*)

Alyssa M. Stokes

TABLE OF CONTENTS

I. Introduction .......................................... 854

II. Background ........................................... 855
A. The "Sharing" Economy ........................... 855
B. Who Is an Employee? ............................. 857
1. Misclassification of Employees as Independent Contractors .................................... 857
2. The Fair Labor Standards Act (FLSA).......... 858
3. California Wage and Hour Laws ............... 860

III. Litigation for Ride Platforms in the Sharing Economy . 862
A. Trouble for Uber Begins in Berwick v. Uber Technologies, Inc. . ................................ 862
1. Facts .......................................... 863
2. California Labor Commission Finds Uber Driver Is Employee ................................... 863
B. California District Court Weighs in: O'Connor v. Uber Technologies, Inc. . ........................... 865
1. Facts .......................................... 865
2. The California District Court Weighs in on Uber's Alleged Misclassification ................ 866
C. Lyft Encounters Misclassification Litigation in Cotter v. Lyft ...................................... 868
1. Facts .......................................... 868

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2. The California District Court Addresses Lyft's Alleged Misclassification ....................... 870

IV. Analysis .............................................. 871
A. Drivers for Ride Platforms Are Likely Employees Under Existing California Multifactor Test ......... 871
1. Berwick Does Not Establish that All Uber Drivers Are Employees ........................ 871
2. Other California Misclassification Cases Suggest Ride Platform Drivers Are Employees .......... 872
B. Uber and Lyft Drivers Are Likely Employees Under the Expansive View of the FLSA ................... 876
1. The Extent to Which the Work Performed As an Integral Part of the Employer's Business ....... 877
2. The Worker's Opportunity for Profit or Loss Depending on His or Her Managerial Skill ..... 877
3. The Extent of the Relative Investments of the Employer and the Workers .................... 877
4. Whether the Work Performed Requires Special Skills and Initiative ........................... 878
5. The Permanency of the Relationship ........... 878
6. The Degree of Control Exercised or Retained by the Employer .................................. 879
C. Existing Labor Laws Should Not Apply to Workers in the Sharing Economy ........................... 879

V. Conclusion ............................................ 882

I. INTRODUCTION

Uber Technologies, Inc.(fn1) (Uber) makes finding a ride easy: open the Uber app, set a pick-up location, request the Uber, and the ride arrives in a matter of minutes with payment made entirely through the application. This simplicity transformed Uber from a ten-by-ten-foot cubicle to one of the fastest growing startup companies in history-reaching a $51 billion valuation in only five years.(fn2) Despite Uber's initial success, litigation regarding whether its drivers are independent contractors or employees threatens its current model.

According to the California District Court, Uber is not off the hook because the drivers are not independent contractors as a matter of law. Further, another ride platform in the sharing economy, Lyft, has encountered similar misclassification litigation, and the California District Court reached the same result-Lyft drivers are not necessarily independent contractors. Importantly, courts have noted the difficulties in applying the current labor laws to the drivers of Uber and

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Lyft and suggest new rules may need to be developed exclusively for the "sharing economy."(fn3)

This Note discusses whether ride platform drivers are employees or independent contractors and further illustrates the difficulty in answering this question in light of the sharing economy. Classifying these drivers into the categories of "employee" or "independent contractor" is no easy feat-workers in the sharing economy do not clearly fit within the traditional definitions of these two categories. While Uber and Lyft drivers do not clearly fit the traditional definition of employee, the difficult question for the sharing economy is whether they should be classified as such. In view of this difficulty, a new classification category should be developed for these workers to provide some protections without hindering innovation.

Part II of this Note provides a background on the sharing economy in relation to the increasing dilemma of worker misclassification and discusses the legal framework in determining whether a worker is an employee under both California law and the Fair Labor Standards Act. Part III provides background on the litigation that ride platforms in the sharing economy have encountered, discussing first the California Labor Commission decision in Berwick v. Uber Technologies, Inc., which addresses the misclassification issues pertaining to Uber. Part III also discusses O'Connor v. Uber Technologies, Inc., another Uber misclassification case and Cotter v. Lyft, Inc., which involves the alleged misclassification of the Lyft platform's drivers. Part IV explores the difficulties associated with attempting to classify these drivers within the current framework under California and federal law and argues a new test should be developed in light of the sharing economy. Part V concludes Uber and Lyft drivers should not be considered employees or independent contractors, but rather a new classification should be developed-giving these drivers some of the protections provided to employees without hindering innovation in the sharing economy.

II. BACKGROUND

A. The "Sharing Economy"

As a result of the economic downturn in recent years, "values such as collaboration and sharing have been embraced and celebrated, and new technologies, especially social media and smartphones, have reinforced these developments."(fn4) This change in economic values has been referred to as the sharing economy and is highly centered on the

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use of technology(fn5) in fostering collaboration.(fn6) More specifically, the sharing economy is defined as entailing:

(1) a latent or otherwise underutilized supply of a good or service that is put to productive use by an independent workforce that does not fit within the traditional employer-employee relationship; (2) a relationship of trust that is difficult to regulate; and (3) a need for a degree of freedom to experiment and innovate within the relationship of trust and beyond.(fn7)

The sharing economy promotes community ownership, sharing, collaboration, small-scale enterprise, and the regrowth of economic prosperity.(fn8) It has been referred to as "the next wave of economic growth."(fn9) Uber, a ridesharing service, is one of the many innovative companies that define this economy.

While the sharing economy has its technological and collaborative advantages, there are a number of distinct disadvantages as well.(fn10) In this new economy, perceived drawbacks include legal gray areas and uncertainty resulting from blurred traditional legal boundaries.(fn11)

However, as one commentator has noted, "the very fact that activities in the sharing economy cannot be put into traditional legal boxes tells us something very powerful and hopeful: these activities are radically different from what we have been doing for the past century."(fn12) The unique and innovative approaches to the new economy make it increasingly difficult to classify the relationships into the legal frameworks that currently exist.(fn13) One legal gray area greatly impacting the sharing economy is whether the drivers for ride platforms, such as Uber and Lyft, are employees or independent contractors.(fn14) Imposing a classification upon drivers of these platforms "with too heavy a hand would undermine the ability of sharing economy providers and platforms to take advantage of their critical strategic advantages: direct, peer-to-peer ease of access, and relatively low cost."(fn15) Therefore, whether these drivers are independent contractors or em-

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ployees is one crucial question looming over both the companies and workers in this economy.(fn16)

B. Who Is an Employee?

The Fair Labor Standards Act (FLSA), the National Labor Relations Act (NLRA), Employee Retirement Income Security Act (ER-ISA), and the Family and Medical Leave Act (FMLA), to name a few, are federal laws which provide certain protections to workers classified as employees. In defining which workers of an employer are employees, misclassification as independent contractors can occur. This section examines the role of misclassification in the sharing economy, explains the test for whether a worker is an employee under one of the federal laws listed above, the FLSA, and further describes the test under California wage and hour laws.

1. Misclassification of Employees as Independent Contractors

Companies-in order to comply with the many different federal and state laws regulating labor and employment-must classify their workers as independent contractors or employees.(fn17) According to the U.S. Department of Labor, misclassification of workers has been found in a vast number of workplaces throughout the United States.(fn18) When employers misclassify their workers as independent contractors, they evade protections afforded to employees under federal and state laws. For instance, the Fair Labor Standards Act (FLSA) requires the payment of minimum wage and overtime to employees;(fn19) the National Labor Relations Act...