Dive Brief:
- One of the two ride app services, Lyft, has settled a lawsuit in California after agreeing to boost driver protections. But it also maintained its business model of using independent contractors, according to Time.
- Filed in San Francisco federal court, the agreement will see Lyft fork over $12.25 million, along with driver deactivation notice and a few other benefits.
- Even with the apparent settlement, which has yet to be approved by a U.S. District judge (the first hearing is April 18), Lyft and its rival Uber will continue to combat lawsuits from drivers who want to be classified as employees and receive reimbursement for out-of-pocket costs including gas and vehicle maintenance.
Dive Insight:
The Lyft and Uber legal battles are scrutinized by many because of the ramifications and impact for other startups that use independent contractors as the bulk of their workforces. For HR leaders at those companies, a shift in worker classification to employee from independent contractor is going to create massive changes in how HR operates – especially since the workforces will instantly grow and bring challenges with that growth.
In the Lyft case, the company was able to maintain its current model in California. But that outcome could change from place to place as more of these lawsuits are launched. As the Time article notes, Lyft dodged a bullet with the settlement as classifying drivers as employees would have been much more expensive and complicated.
In fact, as Lyft was settling its California lawsuit, four drivers in Tampa, FL, filed a lawsuit against Uber claiming the company improperly classifies them as independent contractors, though they consider themselves employees. HR executives from employers using the indpendent contractor model will no doubt be keeping their eyes and ears on these cases as they progress.
