By Linda Chiem

Law360 (July 24, 2020, 7:05 PM EDT) -- California drivers told the Ninth Circuit that Lyft's obstinate refusal to offer paid sick leave during the coronavirus pandemic has damaging consequences for the workforce, which justify granting the drivers employee status through an injunction.

John Rogers, Amir Ebadat and Hany Farag filed an opening brief Thursday seeking to reverse U.S. District Judge Vince Chhabria's April decision denying their emergency motion for a preliminary injunction that would've immediately forced Lyft Inc. to reclassify its drivers as employees and grant them paid sick leave.

The drivers maintain that for far too long, the ride-hailing company has gotten away with labeling its drivers as independent contractors to deprive them of proper wages and benefits, and then hiding behind mandatory arbitration agreements to deflect lawsuits, according to the Ninth Circuit brief.

Lyft's treatment of its drivers is all the more egregious during a global public health crisis, they claim. And California's new worker classification law, Assembly Bill 5, makes clear that a company's workers must be classified as employees if the work they perform is not outside the usual course of the company's business.

"Despite this clarity, in a show of willful obstinance, Lyft has refused to comply with the law," the drivers said.

The Lyft drivers pressed their case for an injunction, reiterating that they feel pressured to continue working and risking exposure to COVID-19 "because of their financial precarity and lack of paid sick leave," and the fact that gig-economy drivers are considered "essential workers" in California, according to Thursday's brief. The Ninth Circuit must step in to make things right, they say.

"COVID-19 has toppled this house of cards and revealed the undeniable damage done by Lyft and the entire gig economy's degradation of labor standards, which impacts not only the drivers but the public at large as well, particularly given that Lyft's denial of state-mandated sick pay [based upon its drivers' misclassification as independent contractors] is contributing to the spread of COVID-19 by compromising drivers' ability to stay home if they are feeling sick," the drivers argued in their opening brief. "Lyft's misclassification of its drivers can and should be enjoined now."

Judge Chhabria had punted the drivers' dispute to arbitration and shut down their emergency injunction bid, chiding them for using the COVID-19 crisis as bait to get a favorable court decision on the long-standing and heavily litigated issue of independent contractor drivers in the ride-hailing industry. The judge said in April that "there's no justification for the tone-deafness of the position advanced by the plaintiffs and their lawyer as this crisis unfolds."

The judge acknowledged that Lyft drivers provide ride-hailing services that are squarely within the usual course of the company's business and "companies like Lyft are thumbing their noses at the California Legislature, not to mention the public officials who have primary responsibility for enforcing A.B. 5." But he concluded that because Lyft's arbitration agreements were enforceable, it was ultimately up to an arbitrator, not the courts, to decide whether such drivers should be reclassified, according to the April 7 order.

The drivers contend Judge Chhabria improperly held that Lyft drivers didn't fit the definition of a transportation worker engaged in interstate commerce who is exempt from the Federal Arbitration Act.

Section 1 of the FAA exempts from arbitration "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." But the statute does not define the phrase "engaged in foreign or interstate commerce," nor does it specifically identify which "class[es] of workers" count toward the exemption.

Judge Chhabria said Lyft drivers' work "predominantly entails intrastate trips, an activity that undoubtedly affects interstate commerce but is not interstate commerce itself." The judge reasoned that Lyft is, in essence, a technologically advanced taxicab company that allows people to "hail" rides from Lyft drivers from pretty much anywhere to pretty much anywhere.

He referenced the U.S. Supreme Court's 1947 decision in United States v. Yellow Cab Co ., an antitrust case in which the justices concluded that Chicago taxicabs were not involved in the stream of interstate commerce "when local taxicabs merely convey interstate train passengers between their homes and the railroad station in the normal course of their independent local service."

But the Lyft drivers countered in Thursday's brief that Yellow Cab, which involves totally different facts, does not control the transportation worker exemption analysis in this case.

Congress enacted the Federal Arbitration Act in 1925, and numerous court rulings in Federal Employers' Liability Act cases at that time interpreted the phrase "engaging in interstate commerce" to include intrastate transportation that was one part of a continuous interstate journey or had a strong nexus with the interstate journey.

The Supreme Court then said in last year's New Prime decision that the words and phrases in the FAA Section 1 exemption must be interpreted based on their ordinary meaning at the time Congress enacted the statute.

The Lyft drivers contend Judge Chhabria discounted or erroneously ignored evidence and relevant case law establishing that Lyft drivers sometimes cross state lines and that carrying passengers, not just traditional goods, are enough to prove they're "engaged in interstate commerce" for the purposes of FAA exemption.

In fact, the First Circuit recently handed a decisive win to gig-economy drivers by finding that a so-called last-mile driver for Amazon was exempt from arbitration even though he made purely local or intrastate deliveries in just one state. The First Circuit's July 17 ruling cleared a path for courts to more broadly interpret which types of workers fit the Section 1 exemption.

Counsel or representatives for the parties weren't immediately available for comment Friday.

The drivers are represented by Shannon Liss-Riordan and Anne R. Kramer of Lichten & Liss-Riordan PC.

Lyft is represented by Rachael E. Meny, R. James Slaughter and Eugene M. Paige of Keker Van Nest & Peters LLP and Rohit K. Singla, Dane P. Shikman, Jeffrey Y. Wu and Benjamin G. Barokh of Munger Tolles & Olson LLP.

The appellate cases are Rogers et al. v. Lyft Inc. et al., case numbers 20-15689 and 20-15700, in the U.S. Court of Appeals for the Ninth Circuit.

--Additional reporting by Brian Dowling and Hannah Albarazi. Editing by Janice Carter Brown.

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