In a recent court ruling, Lyft has agreed to pay an estimated $27 million dollars to workers who are considered independent contractors.
Background
The case, which is in the United States Federal Court, Northern District of California, will result in a payout to the company drivers. The drivers were challenging their status as independent contractors and were arguing that they were company employees. Had they been classified as employees, Lyft would have been subject to change its business model, which would result in providing workers benefits and minimum wage.
The amount of the settlement, which still needs to be approved by Judge Vince Chhabria, replaces an earlier settlement. The previous settlement was rejected approximately one month ago because it did not calculate drivers’ mileage. The new amount nearly doubles what was previously announced.
At the same time, the ruling will result in Lyft revising their deactivation policy. Previously, the company was able to fire drivers at will, regardless of the reason. Once the settlement is enacted, the company will only be able to deactivate drivers for specific, delineated reasons.
Arguments
There are a wide range of opinions concerning the settlement agreement. Some people feel that Lyft and rival Uber will be able to keep their costs down and maintain their business model by classifying their workers as independent contractors. In addition, the company could save money and control costs depending on how the drivers are classified. Furthermore, the workers could potentially have more control over their schedule if they are not regarded as employees of the business.
At the same time, however, being classified as an independent contractor instead of an employee means that the drivers are not able to receive benefits, such as minimum wage, overtime and insurance.
Analysis
If approved, the Lyft settlement could allow their business model to continue. Businesses should also evaluate their model to see what may work best for them both at the present time and in the future.
Conversely, the employees may determine that it is in their best interest to be an employee or an independent contractor. An independent contractor may give an individual more flexibility with regards to their schedule but does not provide a guaranteed income that some people may require.
Conclusion
As a business owner, it can be difficult to navigate labor laws when making a decision on how to classify a worker. Speaking with a business attorney can be very useful for several reasons. The lawyer can help explain the benefits and drawbacks of each possible scenario. At the same time, the attorney can also discuss the business objectives and establish what the organizational goals are. Doing so can also establish what the best business model may be for a company. Lastly, a lawyer can provide insight as to what laws need to be followed with regards to employee and worker classification.
r.w.