The ruling has huge implications for the sharing economy, including the two ride hailing services at the center of separate suits.
(Reuters) – Ride hailing apps Uber and Lyft failed to persuade separate U.S. judges on Wednesday to rule that their drivers are independent contractors instead of employees, in cases that have wide implications for Silicon Valley “sharing economy” firms.
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.
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.
(Story was updated with additional information)