Lawyer in Lyft Accord Vows to Make Uber `Respect' Drivers

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  • Drivers' attorney says Lyft suit tougher to win than Uber case
  • Uber case threatens business model built on using contractors

The lawyer who won a promise from Lyft Inc. to change the way it treats drivers said she now has a stronger resolve to force rival Uber Technologies Inc. to overhaul its business model.

Attorney Shannon Liss-Riordan said she accepted a relatively small $12.25 million payout from Lyft in part because she faced an an uphill battle overcoming a provision in the drivers’ contracts requiring them to take disputes to arbitration instead of court. The class-action case against Uber on behalf of more than 100,000 California drivers is stronger because a federal judge said its arbitration agreement couldn’t be enforced, Liss-Riordan said. 

Under the settlement reached Tuesday, Lyft won’t have to reclassify its workers as employees, as Liss-Riordan sought in her lawsuit against the ride-share company and in a similar complaint against Uber. Instead, the Lyft drivers will remain independent contractors, which remains the crux of the fight between drivers and Uber.

Typically, contractors pay their own expenses and aren’t protected by minimum wage and overtime laws. Companies don’t pay for their unemployment insurance, workers compensation and Social Security.

Lyft’s “settlement was driven by the arbitration agreement, where there’s an important difference in the Uber case,” even while the two lawsuits involve similar allegations, Charlotte Garden, an associate professor at Seattle University School of Law, said in an e-mail.

The U.S. Supreme Court has strongly favored enforcement of provisions of arbitration agreements that prohibit workers from joining class actions, Garden said. “Given that record, the risks of attempting to invalidate an arbitration agreement are enormous,” she said.

Uber ‘Exception’

Uber’s arbitration agreement is an “exception” that didn’t survive court review because it was found to be generally defective as a contract, she said.

Lyft settled with its drivers ahead of a hearing in San Francisco federal court on their bid for class-action status, a crucial milestone in the case. Uber’s case, before a different judge in the same courthouse, has already cleared that hurdle and is headed for trial in June.

“Unlike the case against Uber, where the court held Uber’s arbitration clause to be unenforceable, and therefore certified the case as a class action, we did not have the same arguments to make regarding Lyft’s arbitration clause and recognize that, because of it, it would be very difficult if not impossible, to pursue this case on a class basis as we are doing in the Uber case,” Liss-Riordan said in her statement.

As part of Lyft’s settlement, the company will revise its contract so that drivers can only be deactivated in specific circumstances and not for "any reason." Lyft will also pay fees and some costs stemming from arbitration claims brought by the company or drivers.

“Previously, Lyft drivers may have been required to split the bill for expensive arbitration proceedings,” Liss-Riordan said.

Lyft said it recently signed onto a set of principles, along with leaders of other sharing economy companies, aimed at “preserving flexibility while also providing greater economic security” for workers.

Kristin Sverchek, general counsel at Lyft, said in a statement that apart from the settlement, the company will consider offering “portable benefits” in an attempt to balance drivers’ “cherished” independence with providing them a “safety net.”

‘Something Better’

Liss-Riordan said that while Lyft and other companies have yet to explain specifically what those benefits are, “at least they are talking about trying to do something better for the workers.”

The attorney said she hears far more complaining from Uber drivers about being mistreated by the company -- “cutting fares without their input, shortchanging them on pay they are owed, and deactivating them for no reason or no legitimate reason.”

“We have not been hearing so many concerns from Lyft drivers, which leads us to believe that Lyft is treating its drivers with more respect than Uber is treating its drivers,” Liss-Riordan said Wednesday in a statement.

“Although this difference does not speak to whether either company has rightly or wrongly chosen to classify its drivers as independent contractors instead of employees, it cements our belief that far more Uber drivers than Lyft drivers are anxious for us to continue pursuing these misclassification claims against Uber,” she added.

Uber declined to comment on Liss-Riordan’s statement.

Uber is appealing the ruling that invalidated its arbitration agreement with drivers and on Wednesday lost one of its requests to put the lawsuit on hold during the appeal. A victory for the Uber drivers at trial threatens to upend the company’s business model and cut into its more than $60 billion valuation.

The Lyft case is Cotter v. Lyft Inc., 13-cv-04065, U.S. District Court, Northern District of California (San Francisco). The Uber case is O’Connor v. Uber Technologies Inc., 13-cv-03826, U.S. District Court, Northern District of California (San Francisco).