Cotter v. Lyft, Inc.

• Decision Date: 11 March 2015
• Docket Number: Case No. 13–cv–04065–VC
• Citation: 60 F.Supp.3d 1067
• Court: U.S. District Court — Northern District of California
• Parties: Patrick Cotter, et al., Plaintiffs, v. Lyft, Inc., Defendant.

60 F.Supp.3d 1067

Patrick Cotter, et al., Plaintiffs

v.Lyft, Inc., Defendant.

Case No. 13–cv–04065–VC

United States District Court, N.D. California.

Signed March 11, 2015

Matthew David Carlson, Carlson Legal Services, San Francisco, CA, for Plaintiffs.

Alex Santana, Christopher M. Ahearn, Thomas Michael McInerney, Ogletree Deakins Nash Smoak & Stewart, P.C., San Francisco, CA, for Defendant.

ORDER DENYING CROSS–MOTIONS FOR SUMMARY JUDGMENT

Re: Dkt. Nos. 69, 74

VINCE CHHABRIA, District Judge

I.

The question in this case is whether Lyft drivers are “employees” or “independent contractors” under California law. The answer is of great consequence for the drivers, because the California Legislature has conferred many protections on employees, while independent contractors receive virtually none. The answer is also of great import to Lyft, because its business model assumes the drivers are independent contractors.

At first glance, Lyft drivers don't seem much like employees. We generally understand an employee to be someone who works under the direction of a supervisor, for an extended or indefinite period of time, with fairly regular hours, receiving most or all his income from that one employer (or perhaps two employers). Lyft drivers can work as little or as much as they want, and can schedule their driving around their other activities. A person might treat driving for Lyft as a side activity, to be fit into his schedule when time permits and when he needs a little extra income.

But Lyft drivers don't seem much like independent contractors either. We generally understand an independent contractor to be someone with a special skill (and with the bargaining power to negotiate a rate for the use of that skill), who serves multiple clients, performing discrete tasks for limited periods, while exercising great discretion over the way the work is actually done. Traditionally, an independent contractor is someone a principal might have found in the Yellow Pages to perform a task that the principal or the principal's own employees were unable to perform—often something tangential to the day-to-day operations of the principal's business. See Antelope Valley Press v. Poizner, 162 Cal.App.4th 839, 75 Cal.Rptr.3d 887, 900 (2008) (describing the traditional “notion [of] an independent contractor [as] someone hired to achieve a specific result that is attainable within a finite period of time, such as plumbing work, tax service, or the creation of a work of art for a building's lobby”). Lyft drivers use no special skill when they give rides. Their work is central, not tangential, to Lyft's business. Lyft might not control when the drivers work, but it has a great deal of power over how they actually do their work, including the power to fire them if they don't meet Lyft's specifications about how to give rides. And some Lyft drivers no doubt treat their work as a full-time job—their livelihood may depend solely or primarily on weekly payments from Lyft, even while they lack any power to negotiate their rate of pay. Indeed, this type of Lyft driver—the driver who gives “Lyfts” 50 hours a week and relies on the income to feed his family—looks very much like the kind of worker the California Legislature has always intended to protect as an “employee.”

The plaintiffs in this case were once Lyft drivers. They contend Lyft owes them money because it should have paid them as employees rather than independent contractors. For example, they argue that, under California law, Lyft should have reimbursed them for expenses, and that, at least sometimes, Lyft failed to pay them minimum wage. The plaintiffs propose to represent a class consisting of all people who have driven for Lyft in California since the company's inception in 2012. The plaintiffs and Lyft have filed cross-motions for summary judgment, with the plaintiffs urging the Court to declare them “employees” as a matter of law, and Lyft urging the Court to declare them “independent contractors” as a matter of law. But under California law, the question of how to classify a worker is typically for a jury. A court may only decide the question as a matter of law if application of the multitude of relevant factors would require any reasonable juror to reach the same conclusion. Here, because the numerous factors for deciding whether a worker is an employee or an independent contractor point in decidedly different directions, a reasonable jury could go either way. Accordingly, there must be a trial.

II.

Lyft operates a smartphone application, or “app,” through which passengers are matched with nearby drivers who are available to transport people in their personal automobiles. Lyft markets itself as “Your friend with a car.” Carlson Decl., Ex F at LYFT 000088. Cars that transport passengers for Lyft are easily recognizable, because Lyft gives each driver a “Carstache” (a big fuzzy pink mustache) to attach to the front of his car when using it to give “Lyfts.”¹ To be a Lyft driver, a person must download the app, submit his car for inspection, undergo some form of background check, and submit to an in-person interview with a Lyft representative.See Cotter Depo. 40:21–46:13. To be a Lyft rider, a person must simply download the app onto her smartphone and register her credit card information. See Kirtikar Decl., p.1; Carlson Decl., Ex F at LYFT 000108.

The rider uses the app to hail a ride. Kirtikar Decl., p.1. Lyft's system forwards the request to the nearest driver who is logged in to the app. That driver may then accept, decline, or ignore the ride request. Id. If the driver declines the request or ignores it for a specified period, Lyft's system sends the request to the next closest driver who is logged on. If that driver accepts the ride, he is “matched” with the rider and generally proceeds to pick her up and drive her to her destination. However, the driver may cancel his acceptance before picking up the rider, or upon meeting the rider but before commencing the ride. Id.

At the time the plaintiffs drove for Lyft, the company operated on a “donation” system. After the driver dropped off the rider at her destination, the app recommended a donation for the ride. The rider could decide whether to accept this amount, pay a different amount, or pay nothing at all. If the rider took no action within 24 hours after the end of the ride, Lyft automatically charged the recommended amount to the rider's credit card. But if the rider chose to pay a different amount, Lyft instead charged that amount to the rider's credit card (or charged nothing, if the rider so chose). Lyft retained a 20 percent “administrative fee” from each charge and paid the remainder to the driver, with the driver receiving payment from Lyft on a weekly basis for all rides given during that week. Goldin Depo. at 67:7–12. Lyft has since changed its system in some markets, including California, so that rather than recommending a donation, Lyft charges riders a minimum fare for every ride.²

To accept rides, a driver must log onto the Lyft app in “driver mode.” Lyft uses projected demand to determine how many drivers it will allow to log onto the app in driver mode at any one time. In the first several months after the Lyft app became operational in May 2012, Lyft provided two methods by which drivers could arrange to drive for Lyft on a given day: (i) drivers could submit requests for particular hours one week in advance and Lyft would approve some or all of these hours; or (ii) if it was less than one week in advance, drivers could log onto a website and reserve any available hours. In early 2013, Lyft added a third method—allowing drivers to simply log onto driver mode at any time, without having a particular time slot approved or reserved. But this third method is only available when Lyft determines that demand is not already being met by the drivers who reserved time through the reservation system. Kirtikar Depo. at 61:04–62:04.

Lyft tracks each driver's acceptance rate, and tells drivers that an acceptance rate above 90 percent is “excellent,” while an acceptance rate below 75 percent “needs improvement.” It tells drivers that an acceptance rate “well below the community standard” will result in an email warning, and after three such warnings the driver's account will be deactivated. Carlson Decl., Ex. T at LYFT001733–34. Lyft also tracks each driver's cancellations, and may terminate a driver for high cancellation rates. Kirtikar Depo 159:15–160:14. Lyft instructs drivers to “call support” before canceling a ride. Carlson Decl., Ex. Z at LYFT000038.

At the end of a ride, the app prompts riders to rate the ride on a scale of one to five stars, with one star being “awful” and five being “awesome.” Id. at LYFT 000041. Drivers whose average star rating falls below a certain threshold are subject to termination.³

Lyft's relationship with its drivers is governed in part by its Terms of Service, which drivers must accept if they wish to give “Lyfts.” The Terms of Service apply to both drivers and riders. Under a section titled “Driver Representations and Warranties,” each driver agrees that:

• he is at least 23 years old

• he has a valid driver's license

• he owns or has the legal right to operate the vehicle and is named on the insurance policy covering the vehicle

• he will only use the vehicle that has been registered with Lyft

• his vehicle is in good operating condition

• he will not “offer or provide transportation services for profit, as a public carrier or taxi service, charge for rides or otherwise seek non-voluntary compensation from Riders, or engage in any other activity in a manner that is inconsistent with such Driver's obligations under this Agreement”

• he will not offer rides exceeding 60 miles

Santana Decl, Ex. D at LYFT 000147–48. Elsewhere in the Terms of Service, Lyft disclaims its “control over the quality or safety of the transportation that occurs as a result of the Service.” Id. at LYFT000153. Similarly, in the ...