Two California unions on Thursday undermined a $12.5 million settlement that workers who they don’t represent won against their employer, the ride-sharing service Lyft. The unusual move highlights the increasingly bitter fight between “gig economy” businesses and traditional unions.
Lyft agreed to the settlement to settle unfair labor practice claims in a class-action suit brought on behalf of an estimated 150,000 of its northern California drivers. In addition to the money, the company agreed to change some policies, including its rules for dismissing a driver.
The deal, reached in January, appeared to be a victory for both sides: The drivers got restitution while the company was able to resolve a major legal challenge. Then on March 31, the International Brotherhood of Teamsters stepped in.
On Friday, a District Court judge rejected the settlement, ruling that the settlement wasn’t large enough.
The union doesn’t represent Lyft’s drivers, but it wants to, and it viewed the settlement as an impediment to that effort. So it asked the courts to let it intervene on behalf of five drivers who objected to the settlement. Judge Vince Chhabria, while tossing the settlement, ruled that the Teamsters could not intervene.
“The settlement is taking us backwards,” said Teague Paterson, attorney for San Francisco-based IBT Joint Council 7, which filed the objection with Pomona-based IBT Joint Council 42. Like others in the labor movement, Paterson argues that companies such as Lyft are denying workers essential legal protections.
At issue is the nature of Lyft’s business model and that of similar ride-sharing services such as Uber: whether their drivers are employees or, as the businesses claim, merely independent contactors. Workers are on short-term contracts known as “gigs.”
The “independent contractor” designation frustrates unions because federal labor law and other worker protection laws apply only to employees. Thus, Lyft’s drivers in most cases cannot legally be organized.
That, coupled with the increasing popularity of the services, has unions worried. Lyft, Uber and others compete with traditional taxi cabs, which are heavily unionized.
“While the number of people who earn a majority of their income from work ‘on demand’ via digital platforms constitutes only a tiny slice of the workforce today, some predict this kind of work could become much more prevalent in the future,” the AFL-CIO labor federation’s executive board said in February.
Ride-sharing services have become so popular that a union official with the Communications Workers of America was seen using one to get home after its December press conference to endorse Sen. Bernie Sanders.
“I probably shouldn’t have told you that,” the official said sheepishly after admitting that they had just called Uber.
Unions and various drivers have mounted numerous efforts to force the companies to reclassify them as employees, and won limited victories in courts in California and Florida. In December, the Seattle City Council, reacting to a Teamster-led campaign, voted unanimously to allow drivers to organize. The city ordinance almost certainly clashes with federal law.
The Obama administration is sympathetic to the unions on the issue. In a Huffington Post column last year, Labor Secretary Tom Perez called worker misclassification “one of the most pervasive and damaging trends we are seeing” and said the department was committed to “cracking down on this practice.”
Lyft contends that most drivers prefer to be their own bosses. They point to surveys done for the lawsuit that say 82 percent of drivers favored being independent contractors. A 2015 survey of Uber drivers by Princeton University found that 73 percent preferred to be independent contractors.
Harry Campbell, a Los Angeles driver for Lyft and Uber who runs the popular blog therideshareguy.com, says it’s complicated. Gig economy drivers do want a better deal with the companies, particularly Uber, but not at the cost of giving up their independence.
“Drivers don’t feel they have much of a voice,” he said. “You can really be fired for any reason and have no recourse, rates can be cut at will and more so I think the idea of a union or organization to represent drivers in those situations is very appealing.”
At the same time, Campbell agrees, based on feedback from his blog’s readers, that drivers “overwhelmingly” prefer to be independent contractors. They don’t want to lose the flexibility that comes with that designation, he says.
Unions are working hard to convince drivers that they cannot have a voice without giving up that flexibility. The companies, meanwhile, are pushing the case that drivers can have both.
That explains a lot about the details of the $12.5 million settlement. In addition to the money, Lyft agreed to change its firing policy, requiring it show cause first. It was a strategically savvy move that addressed a key complaint for many drivers.
Plaintiffs’ attorney Shannon Liss-Riordan says they initially had sought to have the Lyft drivers classified as employees, but ultimately found the deal too good to turn down.
“We resolved this case short of getting them reclassified because we believe the benefits provided by the settlement were a fair resolution of the claims given the risks of going forward in this case,” she said.
She fought the Teamsters’ efforts, arguing the union didn’t have standing to intervene because it doesn’t officially represent the drivers. She added before the judge’s ruling that the drivers who do object to the settlement could simply opt out of it if they think it is that bad.
“Nothing about this settlement, or any settlement to which plaintiffs would agree, or the court’s approval of such a settlement, would affect the right of Lyft drivers to argue going forward that they have been misclassified,” she argued in a legal brief.
Paterson conceded the point, but argued that the settlement would have made it much harder to bring new cases involving the classification issue. As far as the northern California Teamsters are concerned, the case was their best chance to resolve the issue in their favor.
“I guarantee that Lyft would use this settlement — and the court’s acceptance of it — as proof that the classification issue has been addressed,” he said before the ruling.
