Uber and Lyft fail to convince judges their drivers are merely 'contractors'

Drivers for Uber Technologies and Lyft scored partial victories Wednesday in two lawsuits in which the companies seek to classify them as contractors rather than employees, and therefore not entitled to protections under California labor law.

In separate cases, two federal judges said the status of the companies' drivers will need to be decided by juries. If the drivers are considered employees, they could be entitled to minimum wages and any tips that customers pay, as well as other benefits. In that sense, the case is seen as a legal test that could affect other companies in the "sharing economy."

The case against Uber was filed in 2013 by drivers who complained the company deprives them of payments they're entitled to. Uber tells its customers that their tip is included in the price of the fare, the drivers said, and Uber doesn't pass on those tips to drivers.

In both cases, the judges ruled on motions for summary judgment, which seek to have a case dismissed as a matter of law before it comes to trial. It's a routine maneuver, but one that's often denied.

In court filings, Uber has argued that it's a technology company, not a transportation company, so it doesn't employ any drivers. Rather, its drivers are "independent contractors," and Uber merely connects them with people looking for a ride.

Judge Edward Chen of the federal district court in San Francisco didn't buy that line of argument. Uber's argument is "fatally flawed in numerous respects," he wrote.

"If ... the focus is on the substance of what the firm actually does (e.g., sells cab rides, lawn mowers, or sugar), it is clear that Uber is most certainly a transportation company, albeit a technologically sophisticated one," Chen wrote.

That means its drivers are "presumptive employees." The question of whether they are actually employees and therefore protected under California Labor law will need to be determined by a jury, he wrote.

"Uber's self-definition as a mere 'technology company' focuses exclusively on the mechanics of its platform ... rather than on the substance of what Uber actually does (i.e., enable customers to book and receive rides)," Chen wrote. "This is an unduly narrow frame."

In the case of Lyft, Judge Vince Chhabria wrote that "at first glance, Lyft drivers don't seem much like employees," but then added that they "don't seem much like independent contractors either."

Traditionally, an independent contractor is someone a company might find "in the Yellow Pages" to perform a task they couldn't do themselves, he wrote, often something tangential to a company's main business. But Lyft drivers use no special skill when they give rides, and their work is central to Lyft's business, he wrote.

"Because the numerous factors for deciding whether a worker is an employee or an independent contractor point in decidedly different directions, a reasonable jury could go either way," Chhabria wrote. "Accordingly, there must be a trial."

James Niccolai covers data centers and general technology news for IDG News Service. Follow James on Twitter at @jniccolai. James's e-mail address is james_niccolai@idg.com