On the heels of legislation that could upend the growing ‘gig economy’ and affect ridesharing companies, a class action lawsuit has been filed in New Jersey alleging that Lyft has not properly compensated its workers and continuously violates how it classifies its drivers.
The complaint, filed in U.S. District Court in New Jersey, claims the San-Francisco-based ridesharing company failed to pay minimum wage, did not pay overtime and did not reimburse business expenses.
Lyft also violated labor laws by intentionally misclassifying its workers to skirt around paying workers minimum wage and overtime, the complaint filed Nov. 21 reads.
The classification of workers has become a contentious and hot topic for the state, with Gov. Phil Murphy convening a task force to examine , which determined that more than $462 million in wages were underreported. In recent weeks, lawmakers have looked to readdress the labor laws and a report revealed Uber owed the state millions of dollars for violating those laws.
Renier Gonzalez, the Jersey City resident named in the lawsuit, has worked for Lyft since October 2017 and often drives between New Jersey and New York City, airports and train stations. He completed 92 trips — roughly 763 miles — and was paid $1,068.80 for his work in 2017, according to the suit.
But he wasn’t reimbursed for other out-of-pocket expenses, including some tolls, gas, insurance and vehicle maintenance, which totaled to more than $400, leaving him with a net pay of $660.63, which does not equate to minimum wage, the suit alleges.
In 2018, Gonzalez drove 334.23 miles for Lyft, and was paid $879.98, but was similarly not paid for the extra expenses of $178.81, leaving him with $701.17, the complaint continues.
By regularly being under-reimbursed for driving expenses, the complaint states, the majority of Lyft drivers “are effectively paid well below the minimum wage.”
It also notes that the some of the 3,000 Lyft drivers in New Jersey are regularly driving across state lines, and are subsequently considered as engaging in interstate commerce — deeming the arbitration clause in the Lyft Driver Agreement unenforceable.
“One way Lyft has been able to continue this practice is by preventing drivers from taking collective action by forcing them into individual arbitrations, which results in Lyft being able to continue its practices,” said Montclair lawyer Roosevelt N. Nesmith, who filed the suit on Gonzalez’s behalf.
And Lyft has tried to shield itself from its minimum wage violations by intentionally misclassifying its drivers as independent contractors rather than employees, he said. The complaint details how the company can prevent drivers from accepting rides outside their hours, performance assessment and controls pay rate for each ride.
Lyft did not comment directly on the lawsuit. A spokesman noted about 94% of Lyft drivers in the state drive less than 20 hours a week to use driving as supplemental income.
“These are parents who have busy schedules, retirees, students, or individuals who have another full-time job. Flexible schedules are extremely important to them, allowing them to set their own hours while earning additional income, and many turn to driving because a traditional job simply doesn’t fit their needs. An employment model would put their flexibility and financial security, as well as the affordability and accessibility our riders depend on, into jeopardy,” the spokesman said.
Nesmith argued Lyft’s business model boosts its profits by failing to pay legally required wages to their drivers.
“Lyft’s practice harms its drivers, competing business that play by the rules and, as states such as New Jersey have realized, cheat states out of tax revenue,” he said. “Mr Gonzalez’s lawsuit will overcome the arbitration barrier and hold Lyft accountable to the drivers on whose backs it has built its businesses.”
It’s far from the only company that has come under fire for worker classification. Uber reportedly owes New Jersey $650 million for violating labor laws relating to misclassifying workers to get around providing benefits and minimum wage.
There’s several bills being heard in the legislature that would address the growing ‘gig economy’ which has skyrocketed by 40 percent, according to the task force.
Democrats who back the bills say businesses are exploiting workers in the ‘gig economy’ by calling them contractors, which holds them back from receiving benefits. Critics say it could cost jobs with over the top regulations.
A six-package bill approved by the Assembly Labor Committee earlier this month focused on the classification of workers, ranging from requiring employers to post notice for employee classification A5843, to paying penalties for misclassification, A5839, to creating a list for employers found in violation, A5841.
State Senate President Stephen Sweeney also introduced a bill, S4204, concerning the employment status of residents regarding wage and unemployment laws, which advanced through the Senate Labor Committee.
New Jersey is one of several states waging a war with ride-sharing companies.
California recently passed a law requiring Uber and Lyft to classify drivers as employees rather than independent contractors. New York drivers also recently filed suit against Uber, alleging they are owed millions in unpaid wages.
Lyft and Uber sued New York City in 2018 for capping how many ride-hailing cars can be on the street. And the app-based companies, along with DoorDash, pledged to spend $90 million to counteract California’s Assembly Bill 5.