Uber And Lyft Drivers' Future Hangs In Balance As Massachusetts Supreme Court Deliberates

The future of ride-share drivers for Uber Technologies Inc. (NYSE:UBER) and Lyft Inc. (NASDAQ:LYFT) in Massachusetts is uncertain as the state’s supreme court is set to hear arguments on their employment classification.

What Happened: The court will determine whether drivers for these companies should be considered independent contractors or employees with rights to benefits and wage protections, Reuters reported on Friday. This decision is part of a broader national discussion about gig workers’ rights.

Two contrasting ballot measures are slated for the November vote. The industry-supported proposal recommends treating app-based drivers as independent contractors with certain benefits, while a labor-backed proposal pushes for Uber and Lyft drivers’ right to unionize.

Uber and Lyft are also dealing with a civil lawsuit launched by former state attorney general Maura Healey, who alleges the companies of wrongfully classifying their drivers as contractors to evade providing them with employee benefits.

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The court’s decision could greatly impact the business models of Uber and Lyft. If the court and voters reject the industry’s position, the companies may need to significantly revamp their operations. On the other hand, a win in a state known for its pro-employee laws could bolster their stance in other states, as per labor activists.

According to various studies, treating drivers as employees could raise company expenses by up to 30%. By categorizing drivers as independent contractors, Uber and Lyft have reportedly dodged paying over $266.4 million into workers’ compensation, unemployment insurance, and paid family medical leave in Massachusetts over ten years.

Uber, Lyft, and other gig economy firms have faced similar struggles in other states, including California and New York, where they have spent millions to secure their drivers’ independent contractor status.

Why It Matters: Earlier this year, the U.S. Department of Labor announced a rule aimed at redefining the criteria for classifying workers as employees or independent contractors. The rule, set to take effect on Mar. 11, focused on the economic dependence of workers on companies to determine their employment status. This shift is expected to affect sectors such as trucking, manufacturing, healthcare, and app-based services, including Uber and Lyft.

In March, Uber and Lyft announced they would cease operations in Minneapolis starting May 1, after the City Council overrode Mayor Jacob Frey's veto and mandated that rideshare drivers be paid the local minimum wage of $15.57 per hour.

Price Action: On Friday, Uber’s stock was trading at $69.75, up 1.74% in the pre-market from the previous day’s close of $68.57, while Lyft’s stock was trading at $17.22  in the pre-market, an increase of 2.26% from the previous day’s close of $16.88, according to Benzinga Pro.

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