New legal discussions on the ride-booking industry's business model could complicate things for companies like Uber and Lyft.
New crowdsourced business models may soon go full-circle and become like the industries they set out to disrupt. A federal judge said on Jan. 30 that Uber’s drivers may have to be treated as regular employees, rather than independent contractors, one day after a San Francisco judge told Lyft the same thing. The change would require ride-booking companies like Uber and Lyft to pay their drivers a minimum wage, reimburse for expenses and offer other benefits.
“The idea that Uber is simply a software platform, I don’t find that a very persuasive argument,” U.S. District Judge Edward Chen said in court.
The judges’ statements are in response to lawsuits filed by Uber and Lyft drivers nationwide, though judges have narrowed the lawsuit to only include California drivers. The drivers allege violations of California labor and gratuity laws.
U.S. District Judge Vince Chhabria admitted on Jan. 29 that while the current legal taxonomy of job descriptions is “woefully outdated,” legal precedents may require him to rule in favor of the drivers. He has not yet issued a decision.
Uber and Lyft have been the target of lawsuits for several years from drivers, cities, and limo and taxi companies that have been threatened by the new service. Uber raised $1.2 billion in December at a valuation of $40 billion.