Cash a check, forfeit your right to sue
Start-up uses a legal tactic to fend off lawsuits: sending contract workers settlements upfront.
The perennial issue in the gig economy is whether workers should be classified as employees. Uber Technologies Inc., Lyft Inc. and other companies that rely on contract work have dealt with this question in a number of ways: staging PR campaigns, hiring lobbyists and arguing in court that they’re software platforms, not employers.
At Getaround Inc., which helps people rent out their personal cars online, the start-up is employing an uncommon legal tactic in the hope of defeating a class-action lawsuit before it starts.
As lawyers were working on one such case, Getaround preemptively sent dozens of checks to people who have worked with the company, attached to paperwork asking them to sign away their legal rights. According to a provision within the documents, depositing the money, even without signing the contract, would count as an agreement to waive their rights to sue. And almost everyone did.
The technique, which has been used selectively by companies in other industries, may prove to be particularly effective in the gig economy, where workers lack financial stability, said Bryan Schwartz, a Bay Area attorney who’s not involved in the case. It’s an “insidious” move, he said, because recipients likely can’t afford to seek legal counsel and weigh the benefits of holding out for a potentially larger payout from a lawsuit.
“Low-wage workers, who are trying to make ends meet, are especially vulnerable,” said Schwartz, who serves on the board of the California Employment Lawyers Assn., a worker advocacy group. “They’re going to sign and take the pittance to waive all their claims.”
Getaround’s legal strategy in this case, which involves whether contract workers should be treated as regular employees, highlights the creative measures gig companies will take to avoid scrutiny of their use of contractors. Many of these businesses are unprofitable and would lose even more money if they were forced to reclassify workers and pay employment benefits.
In California, where Getaround and its ilk are based, companies are reeling from last year’s sweeping ruling by the state’s Supreme Court that limits the scope of work companies can classify as contracted. Lyft, Uber and Postmates Inc. have been lobbying lawmakers and publishing opeds, hoping to find a workaround. And all these companies have faced lawsuits from contractors claiming they should get the same benefits and protections as employees.
A spokeswoman for Getaround said the company denies the allegations in the suit and will continue to defend itself. She wrote in an email that Getaround has a commitment to “fairly value the contributions of our employees.”
The legal gambit is known among employment lawyers as “Pick Up Stix.” The name is a reference to a 2009 case involving a fastcasual restaurant chain that used the strategy to secure settlements with workers seeking overtime pay. Recipients may not realize that accepting the check means they’re giving up a chance at a bigger payout down the line — or they may not be able to afford to wait.
Last year, a former Getaround worker, Amanda Ponciano, sued the company, saying her work as a “fleet associate” qualified as that of an employee but she was paid like a contractor. She and other fleet associates were paid around $15 an hour to move cars around the city and help prep vehicles to be rented. She said they went through a twoweek training program administered by Getaround, were assigned shifts by the company, wore Getaround hats and jackets and used mostly company-provided equipment — details that she said support her misclassification claim.
In October, while her attorney worked to get classaction certification for the suit, Getaround sent out letters and emails to the 61 people in California who had worked the same job as Ponciano in recent years. In the envelope was a check and a message saying the money is theirs if they sign a settlement waiving their right to sue Getaround for anything that happened in the past. It also said they could simply deposit the check to indicate their consent. All but four took the offer.
The checks ranged from $250 to about $9,000, depending on how long the person had worked for Getaround, said Ramsey Hanafi, the attorney working on the suit. The company spent about $145,000 on this initial round of settlements, according to a legal filing. Around the same time, Getaround made its f leet associates employees. The company declined to explain its reasoning for the change.
Then, in May, Getaround sent a new settlement offer. It needed to amend its previous contracts because it had actually asked its fleet associates to sign away more rights than was legally tenable. (Though, in general, collecting preemptive settlements is considered a viable strategy.) In the new letter, Getaround told the workers that they could either sign the new agreement and get an additional $100 check mailed to them, or they could return the money they had previously accepted in the first agreement, Hanafi said. If they did neither, Getaround wrote in the emails, the company could sue them for the money.
The most recent settlements were due in June. The case, which is ongoing, has yet to achieve class-action status. Its next court date is in August. Hanafi estimated Getaround owes $1.6 million for wages and penalties, far more than the company will pay in settlements.
His client, Ponciano, doesn’t fault her former colleagues for taking the cash from Getaround. “I wasn’t surprised when Getaround said, ‘Hey, take this money,’ and they all said, ‘Yes,’ ” Ponciano said. “A lot of the people I worked with were really pressed for money.”
Getaround, on the other hand, isn’t hurting for cash. SoftBank Group Corp.’s Vision Fund led a $300-million investment in the company last year. Getaround has been on a spending spree since then. It bought Drivy, which operates a car-sharing service in Europe, for $300 million in April, and Nabobil, a similar business in Norway, for $12 million recently.
Settling worker claims the way Getaround did is unusual among gig-economy companies but only because most of them already require workers to sign classaction waivers as part of their arbitration agreements, said Christian Schreiber, an attorney who has handled worker misclassification cases against Lyft. Getaround declined to specify whether it has asked workers to sign arbitration agreements.
The ease with which these companies can communicate with workers en masse through an app means they can easily change the rules at any time, Schreiber said. He expects they’ll continue to update the terms of service to minimize liability in the future. Either way, the outcomes are the same.
“These employers can just blast out a communication that either changes the terms of service of employment,” Schreiber said, “or they can offer settlements to wipe out claims going backward in time.”