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What's Good for Employees May Also be Good for Independent Contractors

The recent settlement proposal submitted to the court in the Lyft independent contractor case has a number of curious elements to it. However, a more important lesson from the Lyft situation when compared to Uber and its independent contractor litigation is found in comments by the attorney for the drivers suing Lyft. Lyft has an arbitration provision in its agreement with its drivers. Uber did not have an arbitration provision until after it was sued. The Lyft plaintiffs’ attorney stated that continuing with the case against Lyft was made considerably more difficult by the presence of that arbitration agreement. As we have said here before, arbitration agreements with class action waivers can be a significant tool to avoid the threat of massive collective actions which make litigating issues under the Fair Labor Standards Act, including whether a worker is an employee or independent contractor, too high a risk to take all the way to court. Plaintiff’s lawyers know that this is the case and are considerably more interested in companies that do not have arbitration agreements than those that do. Uber tried to implement an arbitration agreement after the drivers had sued the company, but the trial court rejected that effort. That issue is now on appeal.

It remains unseen whether the court will finally approve the settlement between the drivers and Lyft. It seems the judge may be somewhat concerned that other than the exchange of money, the settlement does not really provide for any different status for the drivers. Going forward, it appears that the Lyft drivers will continue to be treated as independent contractors. Nevertheless, Lyft is closer to ending this threat to its business model.

Meanwhile, over at Uber, the company is preparing for a trial involving potentially massive liability and a true threat to its business model that may occur as early as June. It is important to keep thinking about whether an arbitration clause both with your employees and with any independent contractors who provide services to you may be the right call. If it is the right call, it needs to be made before litigation occurs.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.