New Lawsuits Could Crumble Uber, Lyft

Uber and Lyft are in the midst of another legal battle, which is nothing new. However, this time it’s actually worth paying attention to. It’s easy to understand why one might stop paying attention to lawsuits involving the ride sharing industry.

Mostly, they seem to happen every week in another major city in the U.S. or across the world. Typically, Uber or Lyft will want to set up shop and the local public transit laws or lobby wants to keep them out. It’s usually lawsuits from Taxi companies or the local government, however, two new lawsuits are a threat to the business models of both organizations.

These latest lawsuits come from California drivers who are seeking employee status. Uber and Lyft drivers are treated as independent contractors, not employees. They are not reimbursed for vehicle fuel, maintenance or other expenses. Both lawsuits are going to be decided on by a jury and if they are ruled in favor of the drivers, it could shakeup the finances for both companies.

Having to suddenly reimburse employees for their expenses, even just in California, could put a big dent in the ride sharing future. Part of the Uber lawsuit even speculates that if Uber drivers are employees, they should receive their entire tip for each ride. Part of the lawsuit reads, “Plaintiffs claim that they are employees of Uber, as opposed to its independent contractors, and thus are eligible for various statutory protections for employees codified in the California Labor Code, such as a requirement that an employer pass on the entire amount of any gratuity that is paid, given to, or left for an employee by a patron.”

That would be a lot of money for Uber to lose on lost tips. For example, Uber had 162,037 drivers worldwide, which completed four or more trips. Doing the math, Uber would stand to lose a lot of cash if the jury awards their drivers employee status. However, the current case is only in California. One must assume that if the case in California rules in favor of the drivers, others will follow in the U.S. and across the world. As for the Lyft lawsuit, it might create a new worker classification.

U.S. District Judge Vince Chhabria, who is ruling on the Lyft case wrote, “Perhaps Lyft drivers who work more than a certain number of hours should be employees while the others should be independent contractors. Or perhaps Lyft drivers should be considered a new category of worker altogether, requiring a different set of protections.”

There haven’t been any official statements from Uber or Lyft on these potentially groundbreaking lawsuits. However, we will keep an eye out for updates to this story as they become available.