Did Massachusetts Prove that Rideshare Drivers Should be Full Time Employees?
Case will impact 55,000 Uber drivers & 35,000 Lyft drivers
Originally filed in 2020, the Massachusetts Attorney General brought suit against Uber and Lyft after over 12 years of them operating in the commonwealth. As the first gig-work reclassification suit heard as a bench trial, the outcome of this case could potentially impact the livelihoods of tens of thousands of app-based workers in Massachusetts.
I watched and tweeted my way through the entire 3-week trial, and built a witness tracker cataloging what each witness contributed to the case. Here’s what I learned.
It’s easy as ABC
The case hinges on the Massachusetts independent contractor statute, also known as the “ABC test.” For an employer to treat a worker as an independent contractor instead of an employee, they must be able to establish that the worker was “free from control and direction”; that the service provided is “performed outside the usual course of business of the employer”; and that the individual has their own “independently established trade, occupation, profession or business of the same nature.”
The Attorney General argued that Uber and Lyft cannot fulfill all three prongs of the test, and emphasized that the on-demand rides provided by drivers are at the core of the companies’ business:
Drivers are free from the control of Uber & Lyft
The Attorney General’s position is that like an employer, Uber and Lyft exercise organizational control over drivers because they utilize pricing and matching algorithms that determine how much drivers will earn if they accept a ride and the matches that a driver will receive.
The state argued at trial that drivers are unaware of how many riders or other drivers may be in a given area or how their proposed fare could be higher or lower than it is. Driver earnings are also paid out in weekly installments or instantly at a fee.
Uber and Lyft countered that their pricing algorithms, matching algorithms, and payment processing are actually services that they provide to drivers. They invest heavily in analyzing massive amounts of data to make real time decisions based on market conditions. This allows prices to reflect rider demand and driver supply.
Several drivers testified that competitive pricing is out of their expertise and that setting prices themselves and against other drivers would likely lead to a race to the bottom, with prices sinking to just above the cost of fuel. Secure cashless payment processing is safer for drivers and builds trust between drivers and riders.
Drivers are able to accept or decline rides as they wish and they are under no obligation to accept any given ride request. Uber and Lyft’s actual employees, consisting of data scientists and engineers, work on separate teams that improve the driver or rider app. Lyft conducts “pain point” surveys to collect driver feedback which dictates their roadmap for making improvements to the rider app.
The hours worked by drivers was another recurring theme, since a defining feature in a traditional employer-employee relationship is having a set schedule and requiring permission or notice before taking time off. Uber and Lyft were the only parties to provide empirical analysis on the driving patterns and average hours worked by drivers.
Uber called Justin McCrary, a professor at Columbia Law School, who was designated as an expert in labor economics and econometric methodology. He ran a series of analyses on a one year dataset of Uber data for Massachusetts drivers. He observed that compared to a traditional full time employee who works over 2000 hours annually, only 6.3% of Uber drivers hit the 1500 hour mark and 43% of drivers work between 1–50 days annually.
Uber doesn’t factor per worker costs into its pricing model because of the driver’s independent contractor status. But if they were forced to reclassify, McCrary testified that they would need to attribute such costs to drivers and limit the amount of drivers on the platform.
Lyft called their own expert in labor economics who also conducted empirical analysis on driver patterns. Paul Oyer, a Stanford professor, analyzed two and half years of data from Lyft drivers who completed at least one ride in Massachusetts. This amounted to millions of rides and tens of thousands of drivers.
The data showed that on any given day with at least one ride, 54% of drivers spent less than two hours driving and 90% of drivers spent less than four hours driving. During weeks drivers provided at least one ride, the vast majority spent less than ten hours driving and 92% spent less than twenty hours driving. Oyer’s overall conclusion is that there is no typical Lyft driver and no typical week of driving because of the choice and autonomy they exercise on a consistent basis.
Driving is performed outside the usual course of the Uber/Lyft’s business
An overarching question during the trial was whether Uber and Lyft are technology or transportation companies. The Attorney General argued that they are transportation companies, similar to airlines, in order to support their theory that drivers provide a service to the rideshare companies.
Uber argued that it is not a transportation company. It has no fleet of cars and doesn’t guarantee rides to anyone. It is a tech company that provides matching services between riders who need a ride and drivers who want to provide one. Travel agencies run a similar, intermediary service. They emphasized that the Attorney General was focused on their ride-share services or mobility segment, but ignored its other major lines of business in food delivery and freight which makes up over half of their revenue.
Uber executive Chad Dobb, testified that “Technology is the business. Without it, the connection between various customers I just mentioned could not exist.” Lyft also refuted the government’s notion that it is a transportation company. It described itself as a technology company in the transportation industry and Lyft employees are the ones who build the technology, not the drivers who benefit from it.
Catherine Tucker, Lyft’s expert in digital marketing, rebutted the testimony of the Attorney General’s marketing experts who concluded Uber and Lyft are transport companies because of advertising that focuses on the rider experience, noting that it is natural for 2-sided platforms to use language surrounding the type of interaction being facilitated. Rover uses language about pets and Etsy uses language about crafts.
Drivers have their own, independent business or trade doing that kind of work
The final element of the ABC test was left relatively unexplored in comparison with the first two. We heard from several drivers that they consider their driving business to be their own, with one driver testifying that he used Lyft as means of outsourcing key services across operations, payment processing, and dispatch.
Several other drivers testified that prior to or in addition to driving for Uber and Lyft, they also drove using the dispatch services from car service and limousine companies. Even one of the drivers called by the Attorney General testified that during the pandemic he applied for and received a Paycheck Protection Program (PPP) loan for his business in the taxi industry.
Driver Testimony
Ten drivers took the stand throughout the course of the trial to share their experiences driving with Uber and Lyft. Interestingly, the Attorney General only called two drivers for their case in chief.
We also heard that drivers called by Uber and Lyft chose to testify in this case because they felt what the State was trying to do was unfair and “not right.” A handful said they wouldn’t continue driving using either app if they were reclassified as employees and lost their flexibility to choose when and how much they worked.
Ben Chase is also a basketball coach who began driving between coaching jobs and when his first child was born for added income. He chose to drive evenings and would skip on driving if he had other commitments. He started his own coaching business and initially used his driving earnings for living expenses.
Mary Ellen McAllister began driving when she took a mental health break from her IT career and preferred driving using the queue function as opposed to chasing surges or bonus zones.
John Bonham is a retiree who began driving to earn extra money so he could go on a vacation with his daughter. He chooses to drive early mornings and also prefers using the queue feature to minimize down time between rides. Each driver exercised autonomy over when they would drive, how much they would drive, and what they would prioritize when driving.
What is at Stake?
Lyft noted that unemployment in Massachusetts is at an all time low and if drivers wanted to be in a traditional employment relationship, which comes with benefits like overtime and sick leave, there are options.
They also asserted that the Attorney General has no idea what an employment model in rideshare looks like, which is further evidence that Lyft is not an employer. For context, if Lyft needed to reclassify drivers it would be the 3rd largest employer in Massachusetts.
Lyft also made it clear that should it need to reclassify drivers, it would pull out Massachusetts. During opening statements, Lyft’s attorney said, the Attorney General having it their way “…would mean one less rideshare company in Massachusetts.”
Uber seemed to echo these sentiments, and their Head of US CIty operations, Chad Dobbs, testified that Uber did not have the capabilities to shift to a driver-employee model which would entail integrated technology and processes on hiring, scheduling shifts, supervision etc.
Gig-work reclassification on the ballot
There is also an ongoing Massachusetts case before the Supreme Judicial Court on whether voters will have the ability to vote on whether app-based workers can retain their independent contractor status with added benefits. Oral arguments took place last month and a ruling from the SJC could come any day now, and place the classification question before voters this fall.
After the last witness stepped off the stand, Judge Krupp said he was “champing at the bit” for closing arguments, which have now been moved ahead and will be taking place on June 28 shortly after all parties submit their post trial briefs. His eagerness might be an indicator that he understands how the timelines in this case may run into the ballot initiative. He seems prepared to issue a ruling sooner rather than later.
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