Uber, Lyft said to misclassify workers to boost profits
Massachusetts will become the second state ever to pursue legal action against ride-hailing giants Uber and Lyft over their classification of workers, a system that Attorney General Maura Healey argues leaves almost 200,000 drivers without access to key employment benefits.
Healey filed a lawsuit in Suffolk Superior Court against the two companies on Tuesday alleging that, by categorizing their drivers as independent contractors rather than employees, Uber and Lyft are violating the state’s wage and hour laws.
The nearly 200,000 drivers in Massachusetts, the majority of which the companies say work part-time hours, do not have access to a guaranteed minimum wage, guaranteed paid sick leave, workers’ compensation or traditional unemployment insurance that they would gain if they were deemed to be employees, Healey said.
By improperly categorizing their fleets, she argued, Uber and Lyft are able to pocket “hundreds of millions” of dollars every year that they should be paying in benefits and into state systems. “The bottom line is that Uber and Lyft have gotten a free ride for far too long,” Healey said during a Tuesday virtual press conference.
Her lawsuit accelerates a growing national fight over both the ride-hailing services themselves and an economy that is growing more reliant on “gig workers,” who often have more flexibility but lack many of the protections that come with full employment.
Both companies responded to Healey’s lawsuit Tuesday by arguing that it would contribute to widespread COVID-era economic strain by effectively forcing them to trim down their workforces.
“This lawsuit threatens to eliminate work for more than 50,000 people in Massachusetts at the worst possible time,” Lyft spokesperson CJ Macklin said in a statement. “Drivers don’t want this — 89% of Massachusetts Lyft drivers drive fewer than 20 hours per week and choose to drive rideshare precisely because of the independence it gives them to make money in their spare time. Across the country, drivers have said they want to remain independent contractors over employment by a 4 to 1 margin.”
The two companies also argued that most Massachusetts drivers work parttime and that, according to surveys, most would prefer to remain independent contractors because of the scheduling flexibility it offers compared to traditional employment.
“At a time when Massachusetts’ economy is in crisis with a record 16% unemployment rate, we need to make it easier, not harder, for people to quickly start earning an income,” Uber spokesman Alix Anfang said in a statement. “We will contest this action in court, as it flies in the face of what the vast majority of drivers want: to work independently. We stand ready to work with the state to modernize our laws, so that independent workers receive new protections while maintaining the flexibility they prefer.”
In May, California Attorney General Xavier Becerra also sued the companies on similar grounds. That case was largely prompted by passage of a new state employment law often referred to as AB5.
A similar law has existed in its current form in Massachusetts since 2004 where workers are assumed to be employees unless companies pass a three-pronged test to prove they are independent contractors: workers must be free from the employer’s direction and control, perform services outside the usual course of business, and engage in an independent trade or occupation for the service they offer.