Juries must decide if the drivers for ride hailing apps Uber and Lyft are employees or independent contractors after the companies failed to persuade separate U.S. judges on Wednesday to rule on the issue in cases that have wide implications for Silicon Valley "sharing economy" firms.
In San Francisco federal court, U.S. District Judges Edward Chen and Vince Chhabria in the cases for Uber and Lyft respectively, said in two rulings that juries would have to determine the status of drivers for each company.
Shannon Liss-Riordan, a lawyer representing drivers for both companies, called the decisions “a major victory for the drivers,” because the judges “agreed with many arguments we made about why the facts point to an employment relationship,” according to the San Francisco Chronicle.
Uber declined to comment and Lyft did not respond to a request for comment on the decisions.
Uber and Lyft face separate lawsuits seeking class action status in San Francisco, brought on behalf of drivers who contend they are employees and entitled to reimbursement for expenses, including gas and vehicle maintenance. The drivers currently pay those costs themselves.
An ultimate finding against the two biggest car-ride services could significantly raise their costs beyond the lawsuits' scope and force them to pay Social Security, workers' compensation, and unemployment insurance.
That could in turn affect the valuations of not just Lyft and Uber but also other startups that rely on large networks of privately contracted individuals to provide rides, clean houses and the like.
Uber has raised more than $4 billion from prominent venture capital firms such as Benchmark and Google Ventures, valuing the company at $40 billion and making it the most valuable U.S. startup. Lyft has raised $331 million from Andreessen Horowitz, Founders Fund and other investors.
In Wednesday's ruling, Chhabria acknowledged the difficulty of parsing the status of Lyft's drivers, who share common characteristics with both full-time employees and contractors.
"The jury in this case will be handed a square peg and asked to choose between two round holes," the judge wrote.
"California's outmoded test for classifying workers will apply in cases like this. And because the test provides nothing remotely close to a clear answer, it will often be for juries to decide."