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.

In both cases, the drivers for each ride-sharing company asserted claims seeking repayment of expenses incurred by the drivers and for allegedly unpaid tips. Damages for such expenses and tips are recoverable under California employment laws if the drivers have been misclassified as independent contractors, but not if they have been properly classified as 1099ers.

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 v. Uber, which is pending before Judge Edward Chen in federal court in San Francisco. 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. 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 noted that the State agency in charge of such claims had estimated the value of the PAGA claims at $1 billion.

The Los Angeles case pending before Judge Nelson is Price v. Uber Technologies Inc., No. BC554512 (Super. Ct. Los Angeles County).