Tag: Lyft

Lyft Owes No Duty To Its Drivers To Do Background Checks On Riders

Al Shikha v. Lyft, Inc., 102 Cal. App. 5th 14 (2024)

While working as a Lyft driver, Abdu Lkader Al Shikra was stabbed by a passenger in a “sudden and unprovoked attack.” Al Shikra sued Lyft for negligence based on its failure to conduct criminal background checks on all passengers. The trial court granted Lyft’s motion for judgment on the pleadings, and the Court of Appeal affirmed dismissal of the complaint after concluding that conducting criminal background checks on all passengers would be “highly burdensome” to Lyft and that the type of harm Al Shikha suffered was not “highly foreseeable.”

© 2024 Proskauer Rose LLP.
For more from California Courts, visit the NLR Litigation Trial Practice section

The Gig Continues: California Supreme Court Upholds Proposition 22

On July 25, 2024, the California Supreme Court issued its long-awaited ruling in Castellanos et al., v. State of California and Protect App-Based Drivers and Services, et al., upholding the 2020 voter initiative known as Proposition 22 the allows certain gig economy companies to classify drivers as independent contractors.

In 2019, California Assembly Bill 5, also known as AB5, expanded the landmark California Supreme Court decision in Dynamex Operations West, Inc. v. Superior Court, and made the “ABC” test law.

Pursuant to the ABC test, in order to maintain independent contractor status, the hiring entity must establish each of the following three factors:

  1. that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
  2. that the worker performs work that is outside the usual course of the hiring entity’s business; and
  3. that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

As a result, AB5 is widely perceived as the most draconian independent contractor test in the country.

The impact of AB5 has been pronounced and widespread, perhaps most noticeably for California’s gig economy.

In November 2020, following significant investment by affected companies such as Uber and Lyft, Proposition 22 hit the ballot. It asked voters whether “App-Based Transportation and Delivery Companies” should be exempted from providing employee rights and benefits to their drivers. In other words, whether gig drivers could be classified independent contractors. The initiative passed by 59% of the vote, and was codified as Business and Professions Code section 7451.

Shortly thereafter, drivers’ groups and unions challenged Proposition 22, arguing that section 7451 was unconstitutional because it infringed upon the power granted to the legislature to regulate workers’ compensation. After winning that argument in the Superior Court, the Court of Appeal reversed, and the Supreme Court agreed to hear the dispute.

The state’s highest court rejected the challenge in a unanimous decision, holding that the state constitution does not preclude the “electorate from exercising its initiative power to legislate on matters affecting workers’ compensation.” The decision was careful to examine only the question presented, i.e., whether section 7451 was unconstitutional. The Court specifically declined further exploration of the underlying workers’ compensation issue, stating: “We reserve these issues until we are presented with an actual challenge to an act of the Legislature providing workers’ compensation to app-based drivers.”

As a result of this decision, covered gig workers may maintain independent contractor status, with additional rights such as guaranteed earnings above minimum wage, health care stipends, and insurance — but without the protections of California’s employment laws — while maintaining the flexibility often attractive to those who choose this work.

In addition to drivers for app-based companies covered by Proposition 22, there are other limited exceptions to AB5, such as businesses that work through referral agencies, real estate professionals, and workers providing professional services. Each of the applicable tests is involved and often complicated.

At this stage, before classifying anyone as an independent contractor in California, companies would be wise to review the issues closely with their counsel.

©2024 Epstein Becker & Green, P.C. All rights reserved.
For more news on California Proposition 22, visit the NLR Labor Employment section.

Lyft Sexual Assault Claims Consolidated for Pre-Trial Proceedings

Lyft and other companies have become a part of life and people look to them for a safe ride home at the end of a night out.   However, ridesharing companies, like Lyft and Uber, have been under fire for passenger safety concerns, and the stories of women being sexually assaulted by their drivers are prolific, harrowing and terrifying.  In response to this disturbing trend, a wave of lawsuits in California are addressing the company’s responsibility when a passenger is assaulted.

Lyft Sexual Assault Claims Consolidated in San Francisco Superior Court

Recently,  California Superior Court Judge Hon. Kenneth Freeman granted a petition to consolidate multiple Lyft sexual assault cases in California recommending the Superior Court of California San Francisco County as the appropriate venue for the “complex” coordinated matters to be heard.

The Lyft passenger lawsuits claim the plaintiffs were sexually assaulted by sexual predators driving for Lyft after Lyft had been on actual notice of ongoing, sexual assaults by its drivers. According to the complaints, Lyft failed to respond to the sexual assaults by adopting and implementing adequate driver hiring or monitoring systems and procedures to protect riders. This failure to respond to an identified, systemic issue of sexual assault put more riders at risk.

The Lyft plaintiffs filed a motion to coordinate the cases, as most of the cases included in the ruling had been filed in San Francisco Superior Court.  The court agreed with the Lyft plaintiffs that: Lyft’s corporate headquarters are in San Francisco, as are the majority of corporate witnesses and documents.   The court added, the San Francisco Superior Court uses e-filing, which could potentially save the parties significant costs.  Additionally, only cases that are “complex” as defined by California’s Judicial Council standards may be coordinated.

Need for ESI (Electronically Stored Information)  Orders, Are Lyft Drivers are Independent Contractors or Employees, Additional Plaintiffs Joining Requires Complex Case Management

Co-Counsel for the Lyft Sexual Assault Plaintiffs, Brooks Cutter of Cutter Law argued that there are likely to be thousands of documents, studies, e-mails, and memoranda that are relevant to the claims and defenses in this case and discovery will inevitably require a complex ESI (Electronically Stored Information) order and accordingly a court like San Francisco Superior Court is well-equipped to handle such issues, including staying discovery, staying portions of the case, obtaining stipulations that apply to the entire coordinated case, and selecting bellwether plaintiffs.

Many of the underlying cases in the consolidation action allege vicarious liability or the liability of Lyft for the torts or wrongful actions of their drivers whether or not Lyft classifies them as an employee or independent contractor.  Lyft, Uber, and Doordash are actively fighting California Assembly Bill 5 Pledging over $90 Million To Fund Voter Initiative To Overturn AB-5  which went into effect January 1, 2020.  AB-5 profoundly alters the legal standard applied in evaluating whether a worker is classified as an employee or an independent contractor.   Furthermore,  Uber and Postmates on December 31st  filed a legal challenge in Federal Court alleging AB-5 violates individuals’ constitutional rights, seeking declaratory and injunctive remedies claiming the law unfairly discriminates against technology platforms and those who make a living through them.

Lyft has also been accused of stalling and slowing down discovery. Coordinated proceedings could help plaintiffs’ attorneys combat Lyft’s delays, and it could be beneficial to have one judge see how Lyft has conducted itself in discovery.

Attorney Cutter stated he is aware of five more related sexual assault cases that have been filed in the time since that petition was filed.   According to attorney Cutter, “There are definitely victims who have not yet come forward.”

Lyft Fought Against Sexual Assault Lawsuit Consolidation

Lyft, represent by Williams & Connolly, argued that the consolidation of  Lyft Sexual assault cases “would make in San Francisco Superior Court a national clearinghouse for claims against San Francisco-based companies.”    Furthermore, Lyft contended that:

“all claims against a California based-company —wherever the underlying incidents arise, and however much the disputed facts occurred elsewhere and other states’ laws govern the contested legal issues — could be brought in California courts and coordinated.”

Lyft’s two main objections to consolidation are that “the allegations of misconduct are not the same and that the majority of the cases did not occur in California.”

Judge Freeman, however, disagreed with the company, focusing instead on Lyft’s actions or inactions as an organization to protect rider’s safety. “To the contrary, the predominating legal and factual issues will examine Lyft’s liability for allegedly failing to institute a system to have prevented the assaults in these cases and potential future assaults.” Judge Freeman said. “The court agrees with plaintiffs that this is not a case against the drivers; it is fundamentally a case against Lyft.”

Significance of Lyft Consolidation Ruling

Judge Freeman also found that coordination of the suits would make the most efficient use of court resources and avoid duplicative testimony. In giving his ruling he further noted that there is a risk of duplicative and inconsistent rulings if the cases were not coordinated, which would create confusion, and it would hinder the Court of Appeal’s ability to hear challenges to inconsistent rulings, orders, and judgments, which would inevitably cause significant delays.

“This is an important ruling for victims as it means the claims will be heard in a single court in California,” plaintiff’s co-counsel Brooks Cutter said. “Lyft opposed our motion and wanted to force victims to undergo litigation in separate courts across the country. As a California company, it is appropriate for these Lyft claims to be heard in California.”

The Lyft sexual assault and rape claims each allege that the company did not adequately address the issue of sexual misconduct committed by sexual predators who drove for the ride-sharing company. Furthermore, they allege Lyft owed that duty to its riders, who believed it offered a safe form of transportation.  Attorney Cutter says, “The occurrence of sexual assault in the vast majority of these lawsuits is undisputed. The focus of these lawsuits is Lyft’s accountability for the assaults, which plaintiffs contend were enabled by Lyft’s lax background checks and failure to enact reasonable in-app monitoring to help ensure rider safety.”

Alexandra LaManna, a spokeswoman for Lyft, disclosed to the New York Times: in 2019 nearly one in five employees at the company had been dedicated to initiatives strengthening the rideshare platform’s safety, and that in recent months Lyft had introduced more than 15 new safety features.  Lyft announced in September of 2019 some of these safety features: access to 911 through the app and monitoring and offers of support from Lyft personnel to the driver and passenger if a trip is experiencing an unexpected delay.  These are on top of the company’s criminal background checks, steps to prevent fraudulent use of the app and identify driver identity, and harassment prevention programs.

However, despite these steps, more Lyft lawsuits are being filed, alleging the ride-sharing company has not taken adequate steps to protect riders from sexual assault.

Lyft has not Released a Safety Report – Lyft Victims Can Still File Lawsuits

In December 2019, Lyft competitor Uber released a safety report.  Uber reported that in 2017 and 2018 it received reports of 5,981 incidents of sexual abuse.  In 2018, this included 235 rapes and 280 reports of attempted rape, 1,560 reports of groping, 376 reports of unwanted kissing to breast, buttocks or mouth and 594 reports of unwanted kissing to another body part.  Because Uber’s figures are based on the information it received, the actual numbers could in fact be higher than reported.

Lyft has not released its safety report regarding sexual assaults, rapes, and accidents. Attorney Cutter finds the lack of safety report from Lyft to be problematic.  He says, “It is important for Lyft to issue a safety report so the public has a better understanding of the significant risk of sexual assault in rideshare vehicles.”

Victims who suffered sexual assault committed by a Lyft driver are still eligible to file a lawsuit. Consolidation of the current lawsuits does not prevent future lawsuits from being filed, and it is likely there are many more victims who have yet to come forward about their experiences.

Copyright ©2020 National Law Forum, LLC

More on consolidated case litigation in the National Law Review Litigation and Trial Practice section.

Can Employees Commute Tax-Free on Uber or Lyft?

employee commuter expenses Uber, Lyft, and their competitors, offering handy apps, responsive drivers and competitive prices, are fast becoming a favored commuter option.  Many employers either subsidize employee commuter expenses or allow employees to pay for commuter expenses through payroll deductions.  Under current law (Internal Revenue Code Section 132(f)) and regulation, these expenses can be tax-free (up to certain dollar limits) if they are incurred through qualifying commuter highway vehicles, van pools, transit passes, parking, and bicycles.  Many employers and employees are asking: can Uber and Lyft commutes be provided tax-free?

A quick dive into the legal weeds

Of the types of qualifying commuter expenses, only the “van pool” exemption potentially applies to Uber and Lyft.  Generally, the fair market value of qualifying “van pool” benefits may be excluded from an employee’s income up to $255 per month (2016).  Slightly different rules apply depending on whether the van pool is employer-operated, employee-operated, or “private or public transit operated.”

In the case of employer-operated or employee-operated van pools, the vehicle in question must seat at least six adults (excluding the driver).  In addition, at least 80% of the vehicle’s mileage must be reasonably be expected to be (1) used to transport employees between their homes and jobs and (2) used on trips during which the number of employees transported for commuting is at least 50% of the vehicle’s adult seating capacity (excluding the driver).  This is the so-called “80/50” rule.  A “private or public transit operated” van pool vehicle must also seat at least 6 adults (excluding the driver) but is not required to meet the 80/50 rule.  But what’s a “private or public transit operated” van pool?

The regulations say that the van pool must be “owned and operated either by public transit authorities or by any person in the business of transporting persons for compensation or hire.”  In a series of Information Letters (IRS Info. Letters 2014-0028, 2015-0004, and 2016-0004) the IRS suggests that the issue is factually-charged, and that a van owned by a private vendor will not automatically qualify as “private or public transit operated”.  Here are some key excerpts from IRS Info. Letter 2016-0004:

“The term “operate” is not specifically defined in Code Section 132 or the regulations. However, the Merriam-Webster Dictionary definition of “operate” includes “to use and control (something); to have control of (something, such as a business, department, program, etc.).”

“Thus, in determining whether a van pool is “operated” by an employer, an employee, or by a private or public transit authority, factors such as who drives the van, who determines the route, who determines the pick-up and drop-off locations and times, and who is responsible for administrative details would all be relevant factors.”

What case is the IRS making here exactly?  Is the IRS saying that a van pool can be “employer-operated”, “employee-operated”, “private or public transit operated” or possibly none of the above?  Or, is the IRS suggesting that some van pools that individuals or employers consider to be “private or public transit operated” should actually classified as “employer-operated” or “employee-operated” (and subject to the 80/50 rule)?  Clarification from the IRS would be most welcome.

Application to Uber and Lyft

Can employers provide or facilitate tax-free Uber or Lyft rides?

  • First, Uber or Lyft must actually be a “van pool”. Uber does have an “UberPool” service, and Lyft offers “Lyft Line”, which are meant to carry several passengers in the same direction and would seem to qualify.
  • Second, the vehicle used for the pool must seat at least six adults (not counting the driver). In Boston (where I live), the UberPool service currently maxes out at 4 riders (and would not qualify).  In New York City, however, Uber has begun offering UberPool in six-passenger vehicles. So currently UberPool clears this hurdle, but only in some markets.  (In fairness to Lyft, I was unable to easily dig up similar information on Lyft Line.)
  • Third, are UberPool and Lyft Line “private or public transit operated”? In spite of the frustratingly unclear series of IRS Information Letters cited above, signs point to “yes”.  IRS regulations (which trump Information Letters) require that the pool services be “owned and operated by [a] person in the business of transporting persons for compensation or hire.”  This test seems to be satisfied whether the “person” is the corporate entity or the individual driver.

In sum: Lyft and Uber can potentially qualify as tax free benefits, if the cars seat at least six passengers plus a driver.  But read on . . .

Anything else to worry about?

Even if the “van pool” hurdle is overcome, there are some administrative issues to consider.  While none of these hurdles are insurmountable, they promise to add a layer of hassle for employers.  For example:

  • The IRS directs employers to provide vouchers (or something similar) to employees, which the employees may then use to pay for van pools. Cash reimbursements may be used in lieu of vouchers only if vouchers are not readily available.  Employers will need to determine whether something like a voucher system can be arranged with Uber or Lyft, and if not, the employer must honor the IRS’ cash reimbursement substantiation rules.
  • If the benefit is provided through pre-tax payroll deductions, advance elections (in writing or electronic) must be made by employees. The employer will need to arrange a system to do so.
  • Employers will need to figure out how to value the Uber or Lyft rides. Generally, the fair market value of the benefit is based on all the facts and circumstances. If a car seats six, but the employee rides alone, should the employee be reimbursed tax free for 1/6 of the fare or the entire fare?  Or should the value be based on the value of one seat in an ordinary van pool in the employee’s market?  Or the entire fare paid by the employee?  Note also that there are a number of vehicle valuation rules under the Internal Revenue Code that may be useful.  Each employer should confer with its accountants and tax counsel on this point.
  • Finally, employers need to determine whether it makes sense to offer Uber and Lyft commuter benefits as part of a transportation benefit package.  In addition to the added administrative burden, there are optics issues.  Proliferation of these policies could cause commuter spending to be redirected from public transportation to Uber and Lyft, creating an argument that the practice is not environmentally forward.  Employers should also consider whether any applicable state or municipal laws or ordinances might impact an employer’s transportation benefits.

Conclusion

Based on current guidance, it appears that rides provided to commuters by Uber, Lyft and their competitors may, in some cases, be framed as tax-favored commuter benefits.  However, it remains to be seen whether the IRS will take steps to curtail this practice.   Employers should carefully consider IRS guidance and administrative concerns, and consult with counsel, before including Uber and Lyft in their transit reimbursement benefits.

ARTICLE BY Patricia A. Moran of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
©1994-2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Uber-Complicated: Insurance Gaps for Rideshare Vehicles Can Create Uncertainty for Passengers and Drivers

Many of us have come to enjoy the convenience of summoning a ride via our Smartphones with a rideshare service company such as Uber, Lyft, or Sidecar.  However, significant issues exist over whether rideshare vehicles have adequate insurance coverage to compensate people injured in accidents involving those vehicles.

If one is injured by a Greyhound bus, for example, there is little question that Greyhound likely would have adequate insurance to cover any injuries and likely would have sufficient resources to compensate the injured party even without insurance.

By contrast, if one is injured by a rideshare driver, there are several potential obstacles to securing adequate compensation.

First, the rideshare company may classify the driver as an independent contractor instead of an employee, meaning that the company will not accept responsibility for the driver’s actions.  Second, even if the rideshare company accepts responsibility, the company’s insurance may not provide coverage, as discussed below.  In that event, the injured party is left to rely on the driver’s insurance, which also may be inadequate and may even exclude coverage for rideshare-related accidents.

The independent contractor issue has been litigated in numerous states with different outcomes.  Uber currently is facing two class action lawsuits in California related to this issue: Ghazi v. Uber Technologies, Inc., et al., No. CGC-15-545532 (Superior Court of California, County of San Francisco) and O’Connor v. Uber Technologies, Inc., et al., No. CV-13-3826 (U.S. District Court for the Northern District of California).[1]

Even if rideshare companies accept responsibility for a driver’s conduct, the companies typically have provided only limited insurance for their drivers.  Specifically, rideshare companies typically have not provided coverage in the following two periods: (1) when the rideshare app is turned off, or (2) when the app is turned on but no passenger is in the vehicle.

But, a horrific accident involving an Uber vehicle helped to start changing this dynamic.  Uber was sued in 2014 in California after a driver struck and killed a child during period (2) above, when he had his app turned on but had not yet picked up a passenger.  The case is captioned Liu v. Uber Technologies Inc., et al., No. CGC-14-536979 (Superior Court of the State of California, County of San Francisco).

California and other states recently have started requiring rideshare companies to maintain some coverage for their drivers in period (2), but that coverage is limited.  The companies typically provide contingent liability coverage with $50,000 per person/$100,000 per accident bodily injury coverage, but this insurance typically pays only for losses not covered by the driver’s personal policy.

And, even when rideshare company coverage is in place, insurers have relied on certain insurance policy exclusions in an effort to avoid paying claims.  One insurer is currently making such arguments in the coverage dispute with Uber over the Liu settlement See Evanston Insurance Co. v. Uber Technologies, Inc., No. C15-03988 WHA (U.S. District Court for the Northern District of California).

If a rideshare company’s commercial insurance is inadequate to fully compensate an injured party, that person is left to rely on a driver’s personal insurance.  But the driver’s insurance may be of no help because personal auto policies often contain an exclusion (the “livery exclusion”) for accidents occurring during commercial use of the vehicle, such as when a driver is transporting a passenger for hire.

Recently, there has been some effort in the insurance industry to close the insurance gaps discussed above, particularly during period (2), when a rideshare driver is using a mobile app but has not yet picked up a passenger.

In March 2015, the National Association of Insurance Commissioners adopted a white paper on insurance coverage for rideshare companies titled “Transportation Network Company Insurance Principles for Legislators and Regulators.”  The paper recommends that rideshare companies provide full coverage for period (2) or that drivers purchase individual commercial coverage during that period.

Similar to California, legislatures in Colorado, Illinois, and Virginia have passed laws requiring rideshare companies to offer full insurance during period (2).

In addition, some insurance companies are offering products to rideshare drivers to protect them in the event that rideshare companies’ commercial insurance does not pay.  For example, Geico (in Maryland and Virginia) and Progressive (in Pennsylvania) are offering individual commercial insurance to rideshare drivers that has lower rates than most commercial insurance.  USAA (in Colorado and Texas) offers a commercial insurance policy to rideshare drivers for an extra $6 to $8 per month.  Erie Insurance (in Illinois and Indiana) has removed an exclusion from personal auto policies purchased with a “business use” designation such that rideshare drivers now may be covered.

Overall, many options are emerging to provide additional insurance coverage on rideshare vehicles for the benefit of passengers and other third parties at all stages of the transportation process – from the time a rideshare driver turns on the app through the transport of a passenger.  Passengers, drivers, and affected third parties should continue to monitor these developments to make sure they are adequately protected.

Article By Natalie A. Baughman of Gilbert LLP
© 2016 Gilbert LLP

[1] One consequence of the driver being classified as an independent contractor is that rideshare companies do not have to provide worker’s compensation insurance for a driver’s on-the-job injuries.  The Ghazi case addresses whether Uber drivers actually are employees and thus Uber must provide worker’s compensation insurance.

New Ridesharing Legislation in California and Oregon Highlights Insurance Uncertainty in Emerging Industries

Proskauer Law firm

Managing a company’s exposure to new types of risks is often a complicated endeavor.  We’ve previously reported on the uncertainty that can arise when existing coverage models are applied to a new risk—such as losses arising from data breaches and other cyber-attacks.  Applying existing coverage models to emerging industries presents similar challenges.  These challenges were highlighted recently in the years-long dispute over insurance of ridesharing companies, like Lyft and Uber, which recently reached some degree of closure in California with the enactment of new insurance legislation for these companies.

Ridesharing companies have arisen in the past few years as an alternative to traditional forms of transportation, such as taxis.  These companies neither employ the drivers nor own the cars used for transportation; they essentially serve as an online “middleman” connecting passengers with freelance drivers for hire and expressly disavow that they provide any sort of “transportation services.”  This new business model—blurring the lines between traditional services and social media—presented many questions as to liability and, consequently, risk management.  These questions were brought to the fore earlier this year, when the family of a six year old girl killed by a ridesharing driver sued the ridesharing company.  The company disclaimed liability on the basis that it is not responsible for the acts of its drivers, especially when the drivers do not have ridesharing passengers or are not en route to pick up one.

Many ridesharing drivers have relied primarily on their personal automobile policies, eschewing business coverage altogether, reportedlyat the recommendation of the ridesharing companies themselves.  While ridesharing companies have carried excess insurance policies to cover ridesharing accidents, the insurance industry took the position that these policies did not cover such accidents because there was no primary coverage.  In other words, because the only “primary” insurance policies were personal use automobile policies that did not cover commercial livery use, the excess insurance could not be triggered.

On September 17, 2014, California AB-2293 was enacted to address this uncertainty of coverage.  The statute was the result of discussions between legislators, ridesharing companies, insurers, and traditional taxi companies.  It requires ridesharing companies in the state to provide $100,000 in coverage for their drivers that takes effect the moment a driver connects to the ridesharing company’s dispatch software and increases to $1 million once the driver agrees to pick up a passenger.  It also states that a personal automobile insurer does not have the duty to defend or indemnify claims arising out of ridesharing, unless the policy expressly provides such coverage, and it requires ridesharing companies to disclose this fact to their drivers.

Whether other states will follow California’s lead remains to be seen.  Legislation addressing ridesharing has been introduced across the country, and as one Pennsylvania state legislator observed, “By far the biggest issue is insurance.”  In other states, regulators are addressing the possible insurance gap.  Just days after California’s new statute was enacted, Oregon’s State Insurance Division issued a consumer advisory, warning of the potential unavailability of insurance coverage under personal insurance policies for ridesharing and other services provided in the peer-to-peer marketplace.

As Oregon Insurance Commissioner Laura Cali observed in connection with ridesharing, “When a new industry emerges, it often creates unique insurance situations.”  New industries may exist under insurance uncertainty for years or decades before legislation, regulation, or litigation clarifies the issue.  It is therefore critical when expanding into a nascent industry to consider how the risks of that industry may be managed, under either new or existing types of insurance coverage.

ARTICLE BY

Shawn Ledingham
OF
Proskauer Rose LLP