Lyft Settles Worker Classification Lawsuit for $12.25M | Hacker News Reader

Lyft Settles Worker Classification Lawsuit for $12.25M

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28 pointsndirish184273 comments

These lawsuits expose a couple of things, one there needs to be more kinds of work classifications than employee and contractor. Two, the benefits system, healthcare, whatever, is still not fixed and has a long way to go to cover all citizens, regardless of employment type and status.

Another thing, is these platforms have more than one kind of participant, ones who utilize them as their main source of income, and those who utilize them as complementary source of income or as a part time/college/uni job.

If these platforms would simply be a platform (who like yelp) let the provider sink or swim based on ratings, then they could avoid the problems stemming from their requirements [which makes the platform less ad hoc and more rule based thus leaning toward employee - yet the fear would be a degradation in service to end users and thus a threat to platform viability]

One thing I'd like to know is whether people doing lyft or über full time do on average better or worse than their yellowcab counterpart.

Uber and Lyft get out of more than just paying benefits by classifying their workers as independent contractors. They also avoid paying their portion of the payroll taxes, liability for workman's comp, protective laws (minimum wage, unemployment coverage, for example).

Edit: For those downvoting...you really think these exact things weren't discussed when Uber & Lyft were deciding how they would comp drivers? Heh.

Portion of payroll taxes is ~7.5%, plus an extra 2.5-10% for workers comp/etc depending on your rates.

If they had to reclass as employees, they would just raise prices to end consumer 10-20% to compensate (or fund it via other's money like they're doing now to price out rest of market).

They'd also put a cap on hours per week so drivers couldn't drive more than 30 hours per week. Companies aren't legally required to give benefits to part-time workers (up to 30 hours).

The big draw of independent contractors is that you've just converted labor from a fixed cost to a variable cost. There are tons of Uber/Lyft drivers (namely, anyone not doing it full-time, which is the majority of drivers) who prefer this since they can drive as much or as little as they want.

> If they had to reclass as employees, they would just raise prices to end consumer 10-20% to compensate (or fund it via other's money like they're doing now to price out rest of market).

I think saying that they would "just" raise prices 10-20% is trivializing the problem. One of the reasons that Uber took off was because it was so much cheaper than regular taxis. Would Uber look the same now if it had had 20% higher prices from the beginning? Almost surely not.

I take Uber almost daily from the train to my office because it's about 30% cheaper than a cab. If it wasn't I'd just grab a cab at the cab line. It's so much easier.

Of course if uber has to raise rates because their employee costs go up, you'd have to expect cab companies to do the same because all their employees aren't getting benefits either.

They are, however, paying their portion of the payroll taxes, disability, unemployment, etc. And perhaps softer benefits that still have costs, like paid time off.

I am nearly certain that's not true in the majority of circumstances. Cab drivers are generally self employed and issued 1099s not W2s.

You're correct - taxi drivers have been suing for decades to get employee status. You don't hear about it because Uber is the first major national player that everyone recognizes.

I think what happens in the media is small outfit bias.

Über is big, so what they do must be judged in that light, yellow cab is small, so they get a pass even though they engage in similar practices.

I listen to NPR and they had a bit about über and them being "unfair" to drivers, but never was that compared to how drivers are treated at yellow cab for example. So, because they are big they are looked at more suspiciously, plus they are "tech" so there must be a bad angle there somewhere. People have a thing for underdogs, I do too, but not so much in this case because cabs can often be worse for the drivers, at this time. No telling in the future when automation takes over. The point will be irrelevant then.

If their costs had been 20% higher, they still would have priced others out of the market by using VC money to subsidize (as they still do now). Technically their prices were higher than cabs, since they were only black cars for the first two years.

I personally never take cabs anymore even if they're cheaper, the Uber experience is 10x better IMO. The only time I'll consider it is when I use Flywheel on NYE to avoid surge pricing.

For payroll taxes they could also just pay 7.5% less and net take-home pay would be similar for drivers.

The real draw of independent contractors is the reduction in capital expenditures. They don't need to buy and service cars or pay for mileage. Paying for standby time is also probably prohibitively expensive.

>They also avoid paying their portion of the payroll taxes,

No, they don't. They might avoid being assessed the payroll tax, but the economic incidence (the reduction in purchasing power after prices have adjusted in light of the taxes) is, per a well known result, independent of who assess the tax on, and completely dependent on the shape of the supply/demand curves.[1]

"Making" employers "contribute" half of FICA is just a shell game. If (on normal employees) you made employers pay all of it, they would (likewise) just cut wages by the exact same amount, as everyone's after-tax income would remain the same and no one would have reason to deviate.

[1] https://en.wikipedia.org/wiki/Tax_incidence

>>The key concept is that the tax incidence or tax burden does not depend on where the revenue is collected, but on the price elasticity of demand and price elasticity of supply.

> One thing I'd like to know is whether people doing lyft or über full time do on average better or worse than their yellowcab counterpart.

A good indicator is that most cab drivers (at least in SF) have switched over to Uber. The only ones who aren't doing Uber either (a) got low reviews on Uber and kicked off the platform or (b) have some odd loyalty to cab companies (e.g. maybe they're a part owner in a medallion).

Most taxi cab drivers are treated more poorly than Uber/Lyft drivers. They have to drive to a centralized location to pick up / drop off the car, don't have their own car to take care of, have to pay a per day fee that they don't always pay back if they don't get enough business, etc.

It's less than perfect. People could be migrating more because lyft and über are siphoning away fares. So they go where there is money, even if it's less than historically.

Which makes me want to clarify things. Are über lyft drivers better off than yellow cabs where these platforms have not yet disrupted? In other words, are they better off on über now or yellow cab historically? The answer, I suspect, will remain the same, but its far from cut and dried, I think.

This ultimately comes down to the debate between capitalism vs socialism - if people are still driving at lower rates, then we weren't at a market equilibrium. But should they have basic coverages?

I expect the ODE to become a huge topic for the 2016 election, since (at a high level) it's a manifestation of the Republican vs Democratic platforms.

I think it's more difficult to get to the truth.

This article seems credible: https://pando.com/2015/01/09/the-hidden-cost-of-being-an-ube...

But, what it shows as the "income after op cost" isn't the real truth. That figure ($12.62/hr in Chicago, $34.04/hr in NYC) would be basically 1099 income. You would have to pay self employment tax (not trivial), and forgo whatever benefits a cab company might provide their employees.

If you look for average salary for cab drivers, and compare to the above, you would gather that cab drivers do better than Uber drivers in Chicago, but worse in NYC.

I can't find any credible sources where it seems 100% clear that the comparison is thorough, and apples to apples.

I'm a former CPA and founder of Zen99, which built tax tools for independent contractors like Uber drivers. So this is my forte :)

You're right that it's not cut and dry, and can't be. There are too many specifics to take into account. For example, if you're a part time worker at Whole Foods, you don't get to write off your commute to and from work. But as an Uber driver, there are ways you can do this so you pay less in taxes, which can make your take home more than the WF worker. Neither of them get benefits bc part time employees don't have to be given benefits (note: not sure on what WF policies are, but that's a true statement for part time employees in general).

"These lawsuits expose a couple of things, one there needs to be more kinds of work classifications than employee and contractor."

Why?

Because it forces classifying workers as either employee or contractor when a case could be made for another classification of flex-employee. So, for example a good number of über drivers are part timers, which is fine, but if this becomes a normal aspect of the economy, we need to be able to make it automatic for this class of people to get some kind of benefits. Not as much as employees, and more than [$0] as in contractors who need to do their own taxes, benefits, healthcare, etc.

I guess I'm not seeing a reason for a third kind. It's pretty clear that drivers are employees. The only reason to introduce anything else would be because Uber/Lyft have lobbied to try and prevent full employee status. This "flex-employee" doesn't seem like something that needs to exist, and would only be used to justify not giving benefits.

Sometimes people just want some part time work and don't want to be tied in to one company --allowing them to choose different things on different days, seasons, etc.

Long term über and lyft etc won't need drivers, so it's more for the more high touch industries.

There are lots and lots of people that have 2 concurrent part time jobs, right now. Not trying to be coy, just trying to understand why we need a new classification.

So they're employees, just part time. Problem solved, without needing yet another classification that will end up doing nothing for workers.

Solved with traditional pt jobs, not so much when you join at will. I may work today but because exams, vacation, etc, might not get back in till weeks from now. Maybe I want to just try out a job.

Thjs kind of dipping in and out does not work for a restaurant whose work demand is inelastic. It works for the übers because its elastic. One gal or guy not coming in doesn't cause mayhem in the shift. Surge pricing also helps. You're not going to tolerate surge pricing at restaurants, for example.

So the work demand is different, it's much more flexible and you need a classification which allows for dabblers, people who might work for five or ten different outfits one week, none the next and one the third.

One wonders that if the American health system had a public option- never mind single-payer- it would relieve a lot of stress on startups.

Higher taxes are one thing, but if the American government ran essential benefits such as this, businesses can then focus on, well, their businesses.

... and democrats have been making that exact argument for donkey years.

So is it a valid claim, or not? Aside from the higher taxes to support a new program (not that the gov't doesn't already spend huge amounts in healthcare already) and the insurance industry, who loses out?

Yes absolutely. Its just that in the USA this debate has taken on a religious tenor to where facts and logic essentially mean nothing. It just comes down to who can yell the loudest or push their legislation through

Lyft is an inadequate competitor to Uber. You can't compete with Uber if you have a very similar business plan, a plan that involves taking too much money from drivers. The problem with all these platforms is that they believe they have to become fat middle men to satisfy their investors. I'm working on a platform that will exploit this inefficiency in the market.

Curious about what you're working on... hit me up (link in my profile) if you want to chat. I'm working on something similar.

This is the reason for my comment, looking for like minded individuals & teams.

same here - e-mail in my profile. i have a good amt of experience on this type of stuff.

So like Uber but with lower fees?

Uber is losing hundreds of millions of dollars with "high" fees. So I guess you need an investment of 20 billion or so to compete?

Yes lower fees for drivers and passengers. Uber is wasting too much money on shtick marketing, too many managers & executives and expanding to other countries with anticompetitive laws. My approach will involve a relatively smaller operating team. We will not need 20 billion to compete directly with Uber, because our goals are different from Uber. Having Uber as a competitor provides a clear contrast for potential drivers and customers. Easier to compete when you are lean & understand the market.

Have you ever grown a two sided marketplace? Especially in a marketplace with popular competitors? How do you plan to do this without advertising or throwing money at people (like driver signup bonuses)?

Are you honestly trying to say you understand the market better than Uber?

Lyft already has substantially lower driver fees. At 30 hours/week it only takes 10% and at 50 hours/week it takes 0%.

10% is a bit higher than we need to charge and 0% is not sustainable. This why Lyft is burning so much money. No need to do 0% percent, sensible drivers know you need to make some money too.

Well, if Lines work out in Lyft's favor, it could in theory make money (or lose money) even at 0% take rate. But of course, not all driver are getting 0% so it is viable.

Here's Uber's long-term plans ... sanitized in the online version:

https://twitter.com/neilanalien/status/627873374505562112

That's absolutely hilarious. I love how Uber made them redact their "secret plan" for the online edition!

It'd be pretty damn cool if Lyft/Uber/Instacart/etc. could find a way to give their drivers benefits. I hope this ends up in Lyft doing more than just "looking into" those things.

There's got to be a way to do this such that drivers don't get shafted, while still making a profit...

Someone's gotta pay. Right now it's the drivers paying via not having benefits.

We can have a world where (1) costs are transferred to riders, (2) costs are eaten by Lyft, (3) costs are diffused through increased efficiency and utilization of the workforce -- this tends to manifest itself in overworking of employees though (ex: paying overtime rather than hiring more workers, as is often the case in manufacturing)

I suppose that we could have a scenario for (3) where the goodwill entices riders to use Lyft more, which increases utilization of drivers (ex: collecting fares for X minutes / hour goes to X + N minutes / hour) and that can pay for the increased costs.

> Someone's gotta pay. Right now it's the drivers paying via not having benefits.

As a contractor you always pay for your own benefits. Every contractor does this (or chooses not to on their on volition). Every driver KNOWS they are a contractor, they should know what comes with being one, and it's no ones fault but their own if they don't.

Why should it ever have been an option for the drivers to be the ones paying?

They're not incentivized because in the next 5-15 years they're going to be operating fleets of self-driving cars. They just need to float til then with whatever is the cheapest option.

I bet that Lyft and Uber would greatly reduce the contention with their drivers if they changed the app so that riders could optionally tip the driver.

I'm sure that enabling tips would create other issues, but the bump in compensation would probably go a long way toward improving the relationship.

Lyft offers in-app tipping. Uber inexplicably does not.

Ahh. Wasn't aware of that. I found a screenshot, and it's an odd, non-obvious way to allow tipping:

http://www.sarahdoody.com/wp-content/uploads/2014/03/lyft-ux...

I wonder how much that keeps it from being used.

That's actually not what the tipping screen looks like now. Here's what it's looked like since 2014 http://thehub.lyft.com/blog/2014/10/13/revamped-pay-screen

1. The absence of tipping is a feature. Uber was originally a premium service. Many premium services explicitly discourage tipping.

2. Driver ratings replace the primary function of tipping, which is to incentivize good service and leave feedback.

That said, I very occasionally leave a tip in extraordinary circumstances, and would not be opposed to a way to do that in-app, as long as it was very clear it's not expected (hide behind 5-star rating, call it a "bonus" or something).

The thing is... the driver rating isn't really a real "rating" any more. It's terrifically skewed because everyone knows the drivers basically have to be a level 5 or else they'll essentially get fired.

I feel terrible giving anyone a 4 or below because I know they might get banned from the platform and possibly lose their livelihood. Even if they're a mediocre driver, can't speak English, don't know where they're going and have a smelly car, I don't want that on my conscience that they get fired and can't feed their kids or pay for school.

Most people are aware of know how hard Uber is on their drivers and so now it's become that unless the driver commits an egregious act (road rage, wrong way down a 1 way street, unsafe practices, sexually inappropriate comments) everyone universally gets 5s. If Uber really wanted real rankings they would encourage ACTUAL feedback and have some sort of training and remediation process, not just banning people people if their rating drops below 4.7.

Ratings don't replace the feature, as you don't really choose your driver.

Uber fires drivers with low ratings, so you do, just not directly.

I find tipping frequently awkward but never so in a Lyft. I get a company Lyft credit for trips to/from office so almost always tip on those. For personal trips, I feel no pressure to tip but appreciate the opportunity to do so. I recall a trip to the hotel from Disneyland with 2 toddlers in pouring rain that took 40 minutes to go 3 miles with a total fare of something like $8. That's an easy tip situation.

If you make tips "optional", they will quickly become customary and expected. That does not seem like a feature.

When it comes to tips, I greatly prefer the European model, in which people neither expect nor offer tips under normal circumstances. Pay people to do a job, and pay them enough to want to do that job and do it well. Don't rely on customers to make up the difference.

Not when the transfer isn't made face-to-face. And it defaults to 0. So it actually is more like "the European model".

I've already seen reports of Lyft drivers rating passengers entirely based on whether they received a tip.

So? As a driver, wouldn't you rather go after a fare that does tip instead of one that doesn't?

One of many reasons I mentioned that "they will quickly become customary and expected".

So? One of the things about being a contractor is they're supposed to be able to choose the fares they want. They're doing the economically rational thing of choosing fares that net them more profit.

I haven't driven in awhile but I don't recall that being possible. Drivers do not see the tips until the next day, long after they've had a chance to rate riders.

Please no. Death to tipping!

What stops new drivers from filing the same lawsuit? What if they don't settle and force the issue after Lyft has already previously agreed to a settlement?

I don't know with 100% certainty, but I am guessing rules for class action suits state that once an agreement is reached, the 'class' bringing the suit (i.e., the drivers in this case) cannot sue again for the same reason. That is, because new drivers would be a part of the same 'class' as the previous class action suit, they have technically agreed to the previous agreement, whether or not one individual driver agrees.

If you received a notice, and opted out, or were not sent a notice...then you aren't part of the "class".

The notice has to have an opt out procedure.

Edit: If either of the above applies, you are free to bring your own suit.

This is broadly correct. The part that preserves the rights of prospective plaintiffs to sue individually is contained in the opt-out provisions that are always a part of a class action, and involve notice and deadline requirements.

Hence why I qualified "new drivers". Obviously new drivers (after the settlement) can not have opted out or been part of the class.

Wouldn't that only be if Lyft doesn't continue doing the same thing?

But this suit wasn't certified as a class action. (This article doesn't get this right and didn't appear to interview the principals; here is the L.A. Times story:)

http://www.latimes.com/business/technology/la-fi-tn-lyft-set...

But it will make it more difficult to attain the important thing that was sought -- employee status and its protections. I don't see how this isn't simply a case of Liss-Riordan selling out to make sure she got her cut guaranteed, drivers be damned.

According to the article, Lyft will be making some adjustments which would presumably preclude another lawsuit for the same thing.

Does anyone know if the terms of the settlement agreement are public record anywhere?

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