Law360 (April 7, 2020, 10:37 PM EDT) -- A California federal judge on Tuesday rejected a bid by Lyft Inc. drivers to immediately classify them as employees eligible for sick leave amid the coronavirus pandemic and sent the case to arbitration, while the company argued that a similar effort underway in Massachusetts could jeopardize drivers' rights to generous benefits flowing from federal relief legislation.
In a sharply worded order, U.S. District Judge Vince Chhabria said the California case "was filed hurriedly in an attempt to capitalize on the coronavirus pandemic" and was "riddled with defects." While the judge said a new state law means drivers there should be classified as employees, the legal defects prompted him to deny the emergency motion, grant Lyft's request to send individual claims to arbitration and strike class allegations.
The judge reasoned that even if drivers are classified as employees rather than independent contractors, they would be eligible for a relatively small amount of sick pay. In addition, the judge said, benefits from the recent federal legislation are more generous, but may not be available if drivers are reclassified.
"Sick leave policies, the plaintiffs correctly note, generally decrease the chances that people will go to work sick. And especially during this health crisis, the public interest favors more access to paid sick leave so that people will avoid going to work sick — especially when 'going to work' means occupying close quarters in a car with other people," the judge wrote. "But the question whether Lyft drivers to qualify for California sick pay is less of an emergency than the plaintiffs suggest."
Notwithstanding the decision denying the injunction, the drivers' attorney Shannon Liss-Riordan of Lichten & Liss-Riordan PC called the order an "historic moment" based on Judge Chhabria's admission that Lyft and other gig economy companies are clearly misclassifying their employees as independent contractors.
"We are also pleased that the court remanded the case back to state court (where we filed it) to decide our emergency motion for a public injunction," Liss-Riordan said.
She also said she'd appeal to the Ninth Circuit Judge Chhabria's decision to side with Lyft and force the drivers into arbitration.
Judge Chhabria's rationale echoed the arguments put forward Tuesday by Lyft in a similar putative class action pending in Massachusetts federal court.
There, a lawyer for the ride-hailing company told U.S. District Judge Indira Talwani that it's unclear whether the Internal Revenue Service would offer drivers federal sick leave credits if they win a preliminary injunction for sick leave during the pandemic.
"The opinion that matters in this issue is the IRS," Lyft's attorney, Rohit K. Singla of Munger Tolles & Olson LLP, said. "Even if I can't persuade the court, we have to acknowledge that there's a risk that the IRS could disagree with you or disagree with [opposing counsel]."
But Liss-Riordan, also representing the drivers in Massachusetts, argued any benefit given under Massachusetts law would come in addition to the federal programs, with the perk of the money appearing in the sick driver's next paycheck rather than given as a credit against their next quarterly tax filing.
"The reason we brought this as a preliminary emergency injunction is people need cash now," Liss-Riordan said, adding that there's no significant harm to Lyft if it pays out a few million dollars in sick pay from its cash stockpiles.
As in California, the Massachusetts case seeks to reclassify Lyft drivers as employees who would be eligible for paid sick leave and other benefits. Uber is facing similar suits in both Massachusetts and California federal court.
Last week, Judge Talwani ruled that Lyft couldn't move its dispute into arbitration and that a class action waiver signed by drivers was invalid under Massachusetts law — a decision the company swiftly appealed to the First Circuit. In California, Uber is similarly seeking to push its dispute with drivers out of a courtroom and into arbitration.
The fights took on renewed urgency in recent weeks as the explosion of coronavirus cases shined a spotlight on the need for sick leave to halt the spread of the virus.
During Tuesday's videoconference hearing, Judge Talwani repeatedly pushed back on Lyft's arguments, saying the IRS' test for whether someone is an employee or contractor doesn't consider whether the person got sick leave under state law. The judge said it seemed "shortsighted" for a company to withhold sick leave in the middle of a viral outbreak.
"To ignore the public health crisis that's created when workers of any kind go to work sick has perhaps given us this pandemic here," Judge Talwani said.
Singla countered that the real risk is the IRS pulling back federal sick leave from drivers due to a ruling from the court.
"If we put people at risk of being considered employees, we are undermining the public health," Singla said.
The putative classes of drivers in both California and Massachusetts are represented by Shannon Liss-Riordan of Lichten & Liss-Riordan PC.
In Massachusetts, Lyft, its CEO Logan Green and company co-founder and President John Zimmer are represented by Rohit K. Singla of Munger Tolles & Olson LLP.
In California, Lyft is represented by Rachael E. Meny, R. James Slaughter, Eugene M. Paige, Brook Dooley, Ian Kanig and Jason George of Keker Van Nest & Peters LLP.
The cases are Rogers v. Lyft Inc., case number 3:20-cv-01938, in the U.S. District Court for the Northern District of California, and Cunningham v. Lyft Inc. et al., case number 1:19-cv-11974, in the U.S. District Court for the District of Massachusetts.
--Editing by Emily Kokoll.
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